Pensions and retirement benefits are often one of the largest assets a couple may hold in a marriage. In the event of a divorce, these benefits can become a major issue for both parties. This is because these benefits are generally considered to be marital property and are subject to division in a divorce settlement. In Iowa, divorce cases typically treat pensions and retirement benefits as marital property subject to equitable distribution.
Types of Retirement Benefits
Retirement benefits come in various forms, and each type has its own set of rules when it comes to division during a divorce. Some of the most common retirement benefits include:
Defined Benefit Plans
A defined benefit plan is a type of pension plan that guarantees a specific monthly benefit to the employee upon retirement. The amount of the benefit is usually based on a formula that takes into account the employee’s years of service and salary.
Defined Contribution Plans
A defined contribution plan is a type of retirement plan where the employer and/or employee make contributions to an account. The value of the account at retirement is based on the amount of contributions made and the performance of the investments in the account.
Individual Retirement Accounts (IRAs)
An individual retirement account (IRA) is a type of retirement account that allows individuals to save for retirement by making contributions on a tax-deferred basis. There are two main types of IRAs: traditional IRAs and Roth IRAs.
Iowa Law Regarding Division of Retirement Benefits
In Iowa, marital property is subject to equitable division in a divorce settlement. This means that the court will divide the property in a fair and equitable manner, taking into consideration various factors such as the length of the marriage, each party’s income and earning potential, and each party’s contribution to the acquisition of the property.
Marital Property
Retirement benefits acquired during the marriage are generally considered marital property, subject to division in a divorce settlement. However, if a retirement benefit was earned prior to the marriage or after the divorce, it may be considered separate property and not subject to division.
Qualified Domestic Relations Order (QDRO)
A qualified domestic relations order (QDRO) is a court order that directs a pension plan administrator to divide a retirement benefit between the employee and their ex-spouse. This is necessary because pension plans are governed by federal law under the Employee Retirement Income Security Act (ERISA), and a QDRO is required to legally divide the benefits.
Calculating the Division of Retirement Benefits
The calculation of the division of retirement benefits can be a complex process. In Iowa, the courts generally use the "time rule" to determine the portion of the retirement benefit that is marital property. The time rule is based on the length of time the employee worked for the company while married, and the length of time the employee participated in the retirement plan while married.
Conclusion
Retirement benefits can be a complicated issue in divorce cases, particularly when it comes to the division of the benefits. In Iowa, retirement benefits are generally considered to be marital property subject to equitable distribution. The use of a qualified domestic relations order (QDRO) may be necessary to divide the benefits, and calculating the division can be a complex process. It is important for individuals going through a divorce to seek the advice of a qualified attorney and financial advisor to ensure that their retirement benefits are divided in a fair and equitable manner.