The Walters Gilbreath, PLLC Blog

Other Types of Retirement Plans

by Brian Walters on March 29, 2019

Previous articles in this blog series discussed qualified and non-qualified retirement plans, as well as hybrid plans. This article explains the remaining types of retirement plans, which include military pensions, federal railroad retirement plans, IRAs / 401ks, and annuities. Read on if you want to be better armed with knowledge about these issues.

Military Retirement

Under the laws of the United States, military retirement benefits (the Uniformed Service Retirement System), may be divided in a Texas divorce. Military retirement plans also do not have to comply with ERISA and accrual of benefits doesn’t apply to this type of retirement. If you are trying to divide a military retirement plan in your divorce, the retired pay can get calculated by using a formula. This formula will vary depending on when service in the military started.

Here is the formula:

(the number of years served) x (2.5%) x (the month average for pay)

If you or your spouse are still on active duty, the years that you/they have served so far will be included in this formula.

Note: no more than 50% of the retired pay can go to the spouse who did not serve in the military.

The Community Property portion is the part earned during the marriage. So if the Husband served 20 years in the US Army and was married for the last 5 of those, his Wife would only be eligible to divide 1/4th of that. So, she might get 1/8th of the total pension.

Federal Railroad Retirement Plans

If you have a federal railroad retirement plan, you need to figure out whether or not you have Tier 1 or non-Tier one benefits. If you have Tier 1 benefits, these act as a replacement to Social Security benefits. Because of this, they cannot become divided in divorce (Social Security itself cannot become divided in divorce). However, other tiered benefits, including non-Tier 1 benefits, can be divided in your divorce.

Division of this type of retirement depends on a few different factors. The cost of living allowances gets included in the division of assets, for example. If you are a railroad employee, you might have other retirement plans in addition to the federal railroad one. For example, you might be an employee of Union Pacific or another railroad company. This might mean that you also have a 401(k) plan or some other type of retirement plan. You need to consider how these other plans might get divided.

If you are a railroad employee, you might have other types of retirement plans as well. For example, you may be an employee of Union Pacific or another railroad company. This may mean that you have a 401(k) plan or some other type of retirement plan as well. You should consider how these other plans might get divided in a divorce. Another factor to consider is the Divorced Spouse Annuity. This benefit can go to the spouse who is not a federal railroad employee. This benefit is unique from the division of the retirement plan, so make sure that you discuss this option with a lawyer, especially if you do not work for the federal railroad.

IRAs And Annuity

IRAs and annuity are divided similarly to how defined contribution plans are since they fall into the same category.

A DRO or a QDRO is not needed for the IRAs or annuities to be transferred to the other spouse. Still, there will be requirements for making such a transfer.

Common requirements include:

  • Account numbers;
  • DROs or QDROs;
  • Certain language within the Decree; or
  • Letter of Instruction.Additional paperwork.

Even if you don’t need a QDRO or a DRO to make this transfer, you should complete one of these forms anyway because a 10% penalty won’t apply if you use a QDRO.

Your Situation

It is important to remember that your retirement plan is likely to have specific restrictions or requirements for distribution of the plan. This information can help you begin the process, but to truly protect your retirement plan or your interests, you should contact a divorce attorney. A divorce attorney can use their knowledge and experience with previous cases to help you proceed in the best way possible. Make sure that you check the blog next week for an article regarding common retirement plan division issues in divorce. Understanding these issues before you go through the division process will help you avoid them. To set up a consultation with me, contact our office.

Topics: Retirement Plans