What Happens to Retirement Funds in a Texas Divorce

Military Retirement

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.

You can estimate the size of a military retirement plan with the following formula: (Number of Years Served) x (2.5%) x (Average Monthly Pay)

No more than 50% of retirement pay may be awarded to non-military spouses. Additionally, only funds contributed to military retirement accounts during a marriage are considered community property. If an individual was married for 5 years of his 20 year service, only one quarter of his pension would be eligible for division. Ultimately, his spouse would likely receive approximately 1/8th of its total funds. 

Federal Railroad Retirement Plans

For federal railroad retirement plans, participants need to determine whether they are eligible for tier-1 or non-tier-one benefits. Tier-1 benefits act as a replacement for Social Security benefits. As a result, they are ineligible for division in a divorce. Non-Tier 1 benefits do not function as a replacement for Social Security and can be divided in your divorce. Railroad employees often have additional non-federal retirement plans, like 401(k)s, that must be divided upon divorce. Railroad retirees should also consider division of any divorced spouse annuities. These benefits may be awarded to non federally-employed spouses.

IRAs And Annuities

DROs (Domestic Relations Orders) or QDROs (Qualified Domestic Relations Orders) are not strictly required to divide IRAs or annuities. However, even if you are able to divide these benefits with a domestic relations order,  completion of a DRO may avoid a 10% penalty. 

Next Steps

It is important to remember that each retirement plan may contain unique requirements governing division in the event of divorce. Experienced family law attorneys will be familiar with ways to collaborate with plan administrators, avoid roadblocks, and ultimately expedite the retirement division process. Contact us today if you’re ready to explore your options.