Chapter 9

Retirement and Other Benefits

What impact does the divorce have on your and your spouse’s retirement benefits? What happens regarding health insurance coverage? In this area of your divorce, you and your spouse have some flexibility to make arrangements by agreement, but your flexibility is limited by strict state and federal rules.

9.1 Am I Entitled to a Share of My Spouse’s Retirement Benefits?

Just like any other asset, the first issue is classification. You may be entitled to up to one half of the marital share of your spouse’s retirement benefits.

9.2 How Do I Know What Part of My Spouse’s Retirement Benefits Are Marital?

The retirement contributions and benefits you and your spouse earned during the marriage (from the date of marriage until the date of the final separation), and the gains and losses on those contributions and benefits, are marital property.

9.3 How Much of My Retirement Account Is My Spouse Able to Get as Part of Our Divorce?

Your spouse may be awarded up to, but no more than, 50 percent of the marital share of your retirement account or other retirement benefits. The exact percentage awarded depends upon the specific facts of your case. ( See equitable distribution statutory factors in the appendix for the relevant facts to be

considered by the judge.) You and your spouse may agree for her to receive more than one half of your retirement accounts. The one-half limitation applies to the judge’s authority in the absence of an agreement.

9.4 What Is a Qualified Domestic Relations Order?

A qualified domestic relations order , referred to as a QDRO, is a special type of order required by federal law to divide a qualified retirement account or plan as part of a divorce.

9.5 If I Receive Part of My Spouse’s 401(k) Account, When and How Will That Be Done?

A qualified domestic relations order (QDRO) will be entered transferring your share into an account in your name and under your control. This is usually done in conjunction with the entry of the divorce order. Don’t delay having the QDRO entered because you could encounter problems if your spouse dies after the divorce order is entered, but before the QDRO is entered.

9.6 How Many Years Must I Have Been Married Before I’m Eligible to Receive a Part of My Spouse’s Retirement Fund or Pension?

There is no required minimum period of marriage under Virginia law, though there is a ten years of marriage requirement to receive a portion of your spouse’s military pension.

9.7 My Spouse and I Have Agreed That She Will Receive One Half of My IRA Account. When and How Will That Be Done?

Your spouse will receive one half of your IRA account by a rollover of his or her one half into an IRA in his or her name. Typically the investment company that holds the IRA account will need to receive a copy of your divorce settlement agreement specifying the amount or percentage to be transferred to your spouse, a copy of the divorce order, and completed paperwork required by the investment company.

9.8 If I am Awarded Part of My Spouse’s Retirement Benefits, When am I Eligible to Begin Collecting Them? Do I Have to Be Sixty-Five to Collect Them?

It depends upon the terms of the plan and federal law. Your attorney can review the retirement plan documentation and provide you with answers to your questions.

9.9 Am I Entitled to Cost-of-Living Increases on My Share of My Spouse’s Retirement?

You are entitled only if his retirement plan provides for cost-of-living increases, and the order dividing the retirement provides that you share that benefit.

9.10 Does the Death of My Spouse Affect the Pay out of Retirement Benefits to Me?

This is an important issue to discuss with your attorney. A simple answer is not possible as so many plan options exist. Be aware of two points. First, have the order dividing the retirement account entered at the time the divorce order is entered to avoid a situation in which your spouse dies after the divorce, but before the retirement account is divided. Second, make sure that you understand in advance any survivor benefit component of the retirement plan, and that the settlement agreement and order dividing the retirement account addresses that issue favorably for you.

9.11 Will I Be Able to Collect on My Former Spouse’s Social Security Benefits if He Passes on Before I Do?

If you were married to your spouse for ten or more years and you have not remarried, you may be eligible. Visit your local Social Security Administration office or visit its website at www.ssa.gov.

9.12 What Orders Might the Judge Enter Regarding Life Insurance?

The court may require you or your spouse to maintain an existing life insurance policy on one or both of your lives and to designate your children as the beneficiaries. The court can order you to maintain the policy for as long as you have a legal duty to pay child support for your children.

9.13 Because We Have Young Children, Should I Maintain My Ex-Spouse as the Beneficiary on My Life Insurance?

You should talk to your attorney about your options. If your spouse is listed as the beneficiary, he or she would have no obligation to use the funds for the benefit of the children. You might consider creating a trust for the benefit of the children, and listing the trust as the beneficiary. You could have your former spouse, or some other trusted person, serve as the trustee. And there are other options.

9.14 Can the Judge Require in the Decree That I Be the Beneficiary of My Spouse’s Insurance Policy, so Long as the Children Are Minors, or Indefinitely?

Unless you and your spouse agree, the judge cannot require your spouse to designate you as the beneficiary of his or her life insurance policy, regardless of the age of your children.

9.15 My Spouse Is in the Military. What Are My Rights to His Retirement Benefits After the Divorce?

Your rights depend upon how long you were married, how long your spouse was in the military, how long your spouse was in the military while married to you, and whether you have remarried. This is a complicated area, and rights can be lost if proper procedures are not followed pursuant to strict deadlines. Make sure your attorney has experience with military retirement benefits. If not, he or she should consult with counsel that does have experience in this area.

9.16 I Contributed to My Pension Plan for Ten Years Before I Got Married. Will My Spouse Get Half of My Entire Pension?

No, your spouse is not entitled to any part of your pension or retirement benefits earned before the marriage.

9.17 I Plan to Keep My Same Job After My Divorce. Will My Former Spouse Get Half of the Money I Contribute to My Retirement Plan After My Divorce?

No, only the retirement contributions and benefits earned during the marriage, and the gains and losses on those contributions and benefits, can be divided as part of the divorce.

9.18 Am I Still Entitled to a Share of My Spouse’s Retirement Even Though I Never Contributed to One During Our Marriage?

The judge has authority to award you up to 50 percent of the marital share of your spouse’s retirement account. The exact amount awarded to you, if any, will depend upon the facts of your case. The fact that you do not have a retirement account does not disqualify you from receiving up to one half of the marital share of your spouse’s retirement accounts or benefits.

9.19 Will I Continue to Have Health Insurance Through My Spouse’s Work After the Divorce?

No, you will no longer be eligible after the divorce, though you may have a COBRA option for a period of time. COBRA refers to health insurance benefit provisions provided by a federal statute, the Consolidated Omnibus Budget Reconciliation Act .

9.20 What Health Insurance Plans Are Subject to COBRA?

Group health plans for employers with twenty or more employees are subject to COBRA.

9.21 How Do I Become Eligible for COBRA Coverage?

You must be enrolled in a group health plan covered by COBRA on the day before the divorce order is entered by the judge.

9.22 How Will I Know if I am Eligible for COBRA Coverage Upon Divorce?

When you are no longer eligible for health coverage, your spouse’s employer will provide you with an election notice, generally within fourteen days, of your right to elect COBRA coverage. If you have questions about your eligibility or rights under ERISA (Employment Retirement Income Security Act), you can call the plan administrator or the Employee Benefit Security Administration (EBSA) toll-free number (866) 444- 3272).

9.23 How Do I Elect COBRA Coverage?

You must notify the health insurance plan administrator of your divorce within sixty days. Once the plan administrator receives notice of the divorce, he or she is required to send you an election notice, generally not later than fourteen days after receiving notice of the divorce. You have sixty days after written notice is sent from the plan administrator or health coverage ceased, whichever is later, to elect COBRA coverage.

9.24 When Will My COBRA Coverage Begin?

In the case of divorce, coverage will start on the date of the divorce.

9.25 How Long Does COBRA Coverage Last?

COBRA coverage lasts a maximum of thirty-six months.

9.26 What Type of Health Coverage Will I Receive Under COBRA?

Generally, you will have the same coverage you had immediately prior to the divorce. Providers must offer COBRA beneficiaries the same coverage as non-COBRA beneficiaries. A change in benefits for active beneficiaries will also apply to your plan. You will be allowed to make the same choices given to non-COBRA beneficiaries, such as participating in periods of open enrollment offered by the plan.

9.27 How Much Will COBRA Coverage Cost?

A COBRA premium cannot exceed 102 percent of the cost of the plan to non-COBRA beneficiaries. Since employers generally pay a portion of health insurance premiums for employees, the cost of COBRA coverage will likely exceed the cost paid for your plan prior to divorce, since you will be responsible for the entire premium. Some employers subsidize COBRA coverage, but they are not required to do so.

9.28 Is COBRA Coverage Right for Me?

If you are in the process of divorce and you are currently covered by health insurance provided by your spouse’s employer, you will need to plan for your health insurance coverage upon divorce. You should investigate the cost and coverage of individual plans, any group plans that may be available to you, and plans available through the health insurance marketplace set up as part of the Affordable Care Act (ACA) (visit healthcare.gov for more information). As you consider your options, keep in mind the sixty-day deadline for electing COBRA coverage. Whether you choose a COBRA or non-COBRA plan, aim to select a plan that fits within your budget, and provides you with health care coverage that meets your needs.