22 Mar Divorce and Retirement Benefits in South Carolina
Oftentimes people do not think about the specifics of their retirement plan in great scrutiny during their everyday lives. Unfortunately, once you initiate a divorce process, the majority of your assets are “put on the table” so to speak. You are forced to understand how your assets, including retirement plans, could be split after a final divorce judgment is entered. South Carolina, like a majority of states, follows an equitable distribution approach for the division of assets. However, to determine what is an equitable division, courts often consider whether assets are accessible now or are tax-deferred and only accessible upon retirement. This post will discuss and compare some of the main types of retirement plans to better outline how these assets may be divided in a divorce in South Carolina.
Defined Benefit Plans
If you participate in a defined benefit plan, this means you are entitled to a specific monthly sum upon retirement. The given amount you will receive often varies and increases depending on a variety of factors including how long you have worked for your employer, your salary, and your age. Alternatively, your plan may provide a set amount that you will receive no matter how long you work for the company. For these plans, spouses are often entitled to a portion of the monthly benefit upon the participant spouse’s retirement.
Defined Contribution Plans
In contrast to a defined benefit plan, a defined contribution plan is where an employee contributes to the plan while you are working for the company. Your employer may have an option to “match” the amount you contribute. Once you retire, you will be entitled to receive the balance of your account, which includes the amount you contributed plus any investment gains, losses or fees assessed against your particular account. If your employer offers an Employee Stock Ownership Plan (ESOP), this is a particular type of defined contribution plan, which is invested primarily in the given employer’s stock.
Simplified Employee Retirement Plans (SEPs)
A SEP is a plan in which an employer makes contributions on a tax-favored basis to individual retirement accounts (IRAs) owned by employees. This requires employees to set up an IRA to accept the employer’s contributions.
401(k) plans are often considered a type of defined contribution plan where employees can opt to make contributions to plans before taxes are taken out. Employers also can provide a “match” option where they match up to a certain percentage of the employee’s salary as a contribution to the employee’s 401(k).
Contact Us Today for Assistance
It is very important to understand the type of plan your employer provides to get a better understanding of how it may be divided pursuant to your final divorce judgment. Specifically, some plans require you to prepare and enter a separate Order, known as a Qualified Domestic Relations Order (QDRO) to effectuate their division and some do not. The experienced family law attorneys at Klok Law Firm LLC can help you review your Summary Plan Descriptions for your particular plans and determine the best strategy for the division in your divorce.
Contact us today for a consultation.