When couples get divorced in Illinois, they will divide the marital property they have acquired during the marriage. The marital property includes the accumulated value of the spouses’ retirement assets. When a couple can negotiate their property division, they can agree to a divorce settlement and keep their case out of court. However, when a couple cannot agree, the court will need to step in and decide how the couple’s retirement benefits will be divided. Three major types of retirement benefits must be divided during an Illinois divorce — defined benefit (pension) plans, contributions (401k) plans, and Social Security benefits.
Dividing Pension Plans
Pension plans are not as popular as they once were unless you work for a larger corporation or the government. However, if you do have a pension plan, it will be considered during the division of assets in your divorce. There are major differences between a defined pension plan with a finite amount of money in the plan vs and undefined pension plan such as IMRF or TRS in Illinois. You will probably need to hire an actuary who will value your pension plan. The actuary will consider the value of the monthly pension payments, the percentage of the benefit to be considered a marital asset, and define the pension amount that the spouse who was not an employee should receive.
Deciding How to Split Retirement Benefits
There are a few different options for divorcing couples when it comes to splitting retirement benefits. The spouse who has the pension can “buy out” the non-employee spouse. The spouse keeping the pension will give up other assets of equal value. The couple may decide to split the asset at retirement. When the couple wants to divide the pension at retirement, they will need to get a Qualified Illinois Domestic Relations Order, for example, that directs the retirement distribution to be split in the future.
Splitting Contribution and 401k Plan
Most people have employee contribution plans, such as 401k plans. Most married couples will need to split a 401k plan, either one joint 401k plan or multiple 401k plans. Splitting a 401k is more straightforward than splitting a pension because the 401K typically has a defined work. However, determining the value of the 401k account may still require an actuary. After deciding the value of the plan, the couple will need to determine how to split the plan. Many people choose to split the asset now and create separate 401K accounts. The couple may need to obtain a QDRO.
Social Security Benefits
Social Security benefits are typically not considered “marital property” that must be divided into a divorce. In a 2004 Illinois Supreme Court case, the Court held that courts could not award one spouse a more significant share of marital pension benefits to offset future Social Security benefits. This rule applies even when the other spouse participates in a government pension plan instead of Social Security benefits. Additionally, the Illinois Supreme Court held that it was proper not to reduce one spouse’s pension benefits by future Social Security benefits.
Contact a Schaumburg Divorce Lawyer Today
If you are considering a divorce in Cook County, Glasgow & Olsson is here to help. When you need an attorney, experience matters. We do not provide a free consultation because we view your initial consultation as the most important meeting you will have regarding your divorce. Contact us today to learn how we can represent you.