Division of Retirement Benefits in Missouri Divorces

retirement savings growing

A Missouri divorce case often involves multiple complicated issues that the parties or the court must resolve. This includes questions about child custody and child support, as well as division of marital property. Some assets are easier to divide and distribute than others. With tangible personal property, it could be simply a matter of deciding who gets to keep what, or deciding to sell certain items and splitting the proceeds. Retirement plans, pensions, and other financial accounts are not as simple. Many retirement plans require a separate court order known as a “domestic relations order.” To further complicate matters, different types of retirement plans require different types of domestic relations orders.

Marital Property

Under Missouri law, property acquired by one or both spouses during the marriage is considered “marital property.” Property that one spouse owned prior to the marriage remains that spouse’s separate or nonmarital property, although the other spouse may be able to make a claim for contributions to the value of that property.

The portion of a retirement plan accrued during the marriage is subject to distribution in a divorce. If a spouse first began accruing retirement benefits after getting married, the entire value of the plan as of the date of divorce is marital property. If they already had the plan when they got married, the calculations can be much more complicated.

Domestic Relations Orders

The procedure for dividing and distributing a retirement plan or pension depends first on whether it is a publicly- or privately-administered plan. Some private plans require a specific written order known as a qualified domestic relations order (QDRO, pronounced “QUAH-droh.”) Different public plans require different types of orders.

The order can be part of the overall judgment granting the divorce, or it can be a separate order signed by the judge at the same time. Having a separate order is often a good idea.

Private Retirement Plans

A QDRO is required in order to distribute any retirement plan or pension that is covered by the Employee Retirement Income Security Act (ERISA) of 1974. This is a federal statute that sets standards for employer-sponsored benefit plans, including retirement. It does not require employers to provide benefits, but if they do, they must administer those benefits in compliance with ERISA.

One major selling point for employer-sponsored retirement plans is that they offer favorable tax treatment for contributions made by the employee. Section 401(a)(13) of the federal Internal Revenue Code (IRC) states that a retirement plan is only eligible for favorable tax treatment if it specifies that its benefits cannot be assigned to a third party. Since this is exactly what a division of property in a divorce would do, an exception to that rule is necessary. Section 414(p)(1)(A) of the IRC creates that exception. A QDRO is a written order that meets the requirements set by that section.

Public Retirement Plans

ERISA only applies to retirement plans and pensions offered by private employers. Public employers, meaning federal, state, and local governments and government agencies, may offer retirement benefits through public retirement systems like the Federal Employees' Retirement System (FERS).

Federal Retirement Plans

Most civilian employees of the federal government can receive retirement benefits through FERS. Members of the U.S. Armed Forces may receive benefits through programs administered by the Department of Defense (DOD) or the Department of Veterans’ Affairs (VA).

A QDRO cannot be used to divide a retirement plan offered through FERS. Instead, the court must sign a document known as a Court Order Acceptable for Processing (COAP). The differences between a QDRO and a COAP are mostly superficial. Both order must contain similar information about the plan and the distribution of benefits. A QDRO must contain the word “qualified” in its title, while a COAP cannot contain that word.

Federal law grants jurisdiction to Missouri courts to distribute military retirement benefits in a divorce case. It does not specify any particular form for an order dividing those benefits. The order must provide enough information to allow the Defense Finance and Accounting Service (DFAS) to perform the distribution.

State Retirement Plans

Missouri offers retirement benefits to its public employees through several programs. These include:

  • The Missouri State Employees Retirement System (MOSERS);
  • The Local Government Employees Retirement System (LAGERS); and
  • The Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS).

State law adds another hurdle to our already-complicated analysis. Up to this point, we have discussed plans whose administrators will perform the distribution of benefits based on a QDRO, COAP, or other document. Not all public retirement plan administrators in Missouri are authorized to do this.

Retirement plans offered through MOSERS may be distributed with a Division of Benefits Order (DBO). Missouri courts can order the division of plans administered by LAGERS, but state law prohibits any “execution, garnishment, attachment,” or assignment of benefits. This means that the employee is responsible for distributing the benefits to their ex-spouse themselves.

Another exception involves retirement benefits offered through PSRS/PEERS. State law allows an employee to accrue retirement benefits in lieu of credits towards Social Security. Those benefits are not considered marital property, and therefore are not subject to division in a divorce. See the Missouri Supreme Court’s ruling in In Re Marriage of Woodson, 92 S.W.3d 780 (2003), for more on this.

Distributing a Retirement Plan After the Divorce

In most cases, the next step after the divorce is to send a certified copy of the order to the plan administrator. Private plan administrators have extensive discretion to approve or reject a QDRO. For this reason, submitting a draft order for approval prior to obtaining the final judgment of divorce is highly advisable.

The federal Office of Personnel Management processes COAPs for civilian retirement plans. The DFAS Garnishment Law Directorate handles the division of military retirement. At the state level, MOSERS and other plan administrators have their own systems for processing court orders.

Kansas City family law attorney Mark A. Wortman focuses his practice exclusively on divorce and other family law matters. To schedule a confidential consultation with a knowledgeable legal advocate, please contact us today online or at (816) 523-6100.