Ohio State Retirement Pension Plans and Divorce Laws

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Ohio is an equitable distribution jurisdiction. If the spouses do not have a validly executed marital settlement agreement, judges will distribute property and debts equitably by dividing marital property as the judge deems fair. Judges can review the specific factors of the marriage, including the length of the marriage, the economic abilities of the spouses, tax consequences, and, if the spouses have children, the custodial and financial arrangements for visitation and child support.

ERISA Law

  • Under the federal Employee Retirement Income Security Act (ERISA), divorce retirement allocations are within ERISA's purview. Ohio attorneys must incorporate a Qualified Domestic Relations Order (QDRO) into the final divorce decree. Under ERISA's regulations, the QDRO must be a written plan that can be used by the pension plans' administrators to determine current or future distributions. Because some plans are not effective until the payor-spouse reaches full retirement age, the QDRO's divorce distribution will not become effective until a subsequent date. The QDRO must contain specific information, including both spouses' contact information and mailing addresses. The QDRO must specifically set forth the distribution or award amounts that each spouse will be entitled to in the future. The QDRO must also include information for current distributions. QDROs may not subsequently be modified to nullify a previous allocation.

Ohio Equitable Distribution Law

  • Retirement benefits acquired during the marriage include pension plans, IRA accounts, 401(k) accounts and deferred pension plans. The court will determine the date of marriage and the legal date of separation. The amounts within the retirement accounts earned prior to the marriage can be considered separate property. The court will allow the spouse to retain that part of the pension if the account was not commingled into a marital pension account with joint marital contributions. Pension benefit amounts earned during the marriage are considered marital property and part of the marital estate.

IRS Tax Law

  • Spouses who are entitled to current retirement and pension distributions may be able to roll them over into an eligible retirement account without triggering tax recognition of income assessment. If the payee is not able to roll over the retirement funds received through divorce settlements, then the payee must make a cash distribution of the funds. The IRS typically does not assess penalty taxes for early withdrawal on the payor or payee. This allows the recipient-spouse to make a penalty-free distribution of the retirement funds without triggering the ERISA early withdrawal penalty. However, the spouse withdrawing the funds must pay both state taxes and federal taxes upon the distribution.

References

  • Photo Credit dayton, ohio image by sonya etchison from Fotolia.com
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