After recently celebrating their 25th wedding anniversary, two people decide they no longer wish to spend their life together and file for divorce citing irreconcilable differences. The wife worked for a steel company for the past 30 years and started contributing to a 401(k) plan after marrying. A family law attorney highly experienced in the manner in which a court divides pension plans can provide clients with valuable guidance during a divorce such as this one.

Determining the division

Under Maryland statutes §§8–203-205, pension plans acquired by a spouse after the marriage and before the divorce decree is presumed by the court to be marital property subject to division. Generally, pension plans can be categorized as either a defined benefit or a defined contribution plan. With a defined benefit plan, an employer agrees to pay a benefit to the employee in the future. The benefit is determined by a distinct formula often derived from the number of years worked and the employee’s salary at the time of retirement. In contrast to a defined contribution plan, a defined benefit plan’s current value is not easily determined and usually requires an actuary’s assessment. 

A defined contribution is a defined sum of money the employee added to the fund while employed. The value may be determined at any moment in time. Examples of defined contribution plans include:

  • Individual retirement accounts (IRAs)
  • 403(b) plans
  • 401(k) plans

In the scenario above, the has a 401(k) plan, and the value is definable at any given point in time. Because the wife did not start contributing to a retirement plan until she married, the entire pension plan is deemed marital property and is subject to equitable division. A written set of instructions provided in a qualified domestic relations order informs the retirement plan administrator that the pension benefits are being divided and delineates the terms as to the manner and time the benefits should be paid. 

Mudd, Mudd & Fitzgerald, P.A. offers a straightforward evaluation of pension plans and evaluates the likely division upon divorce. Located in La Plata, the firm represents clients in cities throughout southern Maryland in marital dissolution proceedings.