I have consulted with men/women who, after their divorce proceeding has been concluded, are surprised to learn that even though their divorce is final, and in fact has been final for many years, there is still the retirement plans that need to be divided. First, retirement plans generally involve two types of plans: 1) a defined benefit plan or 2) a defined contribution plan. The first generally is in the form of a pension, where upon retirement, the participant will receive a defined monthly amount. The second type of retirement is generally in the form of a 401(k), 403(b) or the like. The participant will, while working, contribute a defined monthly amount to the plan.
It is odd to me that something so valuable sometimes gets so little attention. Many times I will see a Judgment of Dissolution (the final decree in a divorce case) wherein the Judgment will have general boilerplate language dealing with the retirement plan. Either of these type of retirement plans can be extremely valuable. Sometimes the participant has participated in the plan for 10, 20, or 30 years. These are extremely valuable community assets, sometimes worth hundreds of thousands of dollars, yet only get brief mention that the court will reserve its jurisdiction (authority) to divide the plans. This means that while you may be divorced, the retirement plan still needs to be divided! Not a pleasant thought to be faced with: reopening an emotionally sensitive time in one‣s life.
Further, this type of general boilerplate treatment may be jeopardizing a spouse‣s community interest in the retirement plan. What do I mean? As mentioned, there are many different types of retirement plans: 401(k), 403(b), California State Teachers Retirement System (CalSTRS), Los Angeles County Employee Retirement Association (LACERA), Motion Picture Industry Pension and Health Plans, as well as various union retirement plans, federal retirement plans, and military retirement plans, to name a few. What is extremely important to note is that some of these plans, after a Judgment of Dissolution is granted, do not have any protection for a former spouse as to their community interest. In other words, if there is a Judgment of Dissolution, and the participant spouse predeceases the former spouse, the former spouse may lose his/her right to their interest.
These types of risk can easily be eliminated by getting the proper order (usually called a Domestic Relation Order) in place at the time of the Judgment of Dissolution. Thus, don‣t risk your interest in a community retirement plan, hire the right attorney so your future financial security is protected.