Types of Retirement Plans Divided During Massachusetts Divorce

| May 23, 2018 | Divorce |

Infographic - Two Basic Types of Retirement Plans

Massachusetts family law courts characterize and value retirement plans in a divorce based upon these and other factors depending on the details of each specific plan:

  • Type of plan
  • Increase in plan value during the marriage
  • Contributions to the plan during the marriage
  • Specific contractual terms of the plan
  • Performance of plan assets
  • Age of the employee
  • Years of employment before and after the
  • Date of the marriage
  • First possible retirement date
  • Survivorship options

Massachusetts family law courts generally allocate retirement plan benefits according to when the benefits were earned. Benefits “earned” during the marriage are generally characterized as marital property. Benefits “earned” before the date of marriage are generally characterized as separate property.

Defined Benefit Plan

Defined Benefit Plans are plans that generally provide for specific benefits, commencing at a specific age or date that are payable for a defined period of time (e.g. $6,000 per month, commencing at age 55, and payable until death). This type of plan is valued by an actuary who calculates the present value of the future stream of payments using various assumptions and tables. 

Military pensions are allocated using the frozen benefit method. The marital interest is fixed as of the date of the court order and is calculated as if the service member had retired on that day.

Defined Contribution Plan

A Defined Contribution Plan is a plan that allows for a specific dollar contribution to be made into the plan annually. The plan functions somewhat like a savings account. Examples of these plans would include 401(k), IRA, SEP IRA, profit sharing plan, etc. The value of these plans is reflected on the employee’s current plan statement. An actuary is not used for the valuation. The money contributed into these accounts, after the date of the marriage is generally characterized as marital property. 

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