When couples divorce, they can reach an agreement about how their assets should be divided, and the court can adopt that agreement as part of the divorce decree. However, if a couple cannot agree on property division, including the division of a pension, Maryland courts step in to split the marital assets.
Not all property that spouses own at the time of divorce is considered marital property that the court can divide. In Maryland, property a spouse owns before his marriage is considered the separate property of that spouse, and is not typically divisible by the court in a divorce. For pensions, this means that the portion of the pension a spouse earned prior to the marriage is his own separate property, but the portion of pension he earned during the marriage is marital property.
When it comes to property division, Maryland is an “equitable distribution” state. This means the court distributes property in an equitable manner, but not necessarily equally. When the court partitions the marital portion of a pension, it does so after considering several equitable distribution factors set forth in Maryland law. As a result, the court may split the pension 50/50 or make a different distribution. The court may also choose to award one spouse a greater portion of other types of marital property to compensate for a lesser pension award. If the court does award a portion of the pension to the non-earning spouse, it can award a lump sum payment or periodic payments.
A Qualified Domestic Relations Order is a court order permitting the administrator of a pension plan to pay a certain portion of the pension directly to the non-earning spouse. This allows the non-earning spouse to receive payments without the interference of the earning spouse. Usually, QDROs must be part of a court-ordered process to be effective, and they must meet certain legal requirements. QDROs cannot change the rules of the retirement plan, but they can assign rights within the plan’s rules.
Pension plans often contain certain survivor benefits, separate from the actual pension benefits. Survivor benefits are paid to a beneficiary when the earning spouse dies since pension payments stop upon the earning spouse’s death. If a pension plan includes an option for survivor benefits, these benefits may cost extra. Thus, if the non-earning spouse wants to be listed as the beneficiary of such benefits, she may ask the court to include an order requiring the earning spouse to sign up for survivor benefits and pay for them, or this can be included in a marital settlement agreement.