A Recipe for Disaster: Using One Sentence to Divide a Retirement Plan
Posted on Jan. 14, 2026 / Subscribe 0
Retirement plans and the marital home are among the most valuable assets in a divorce. However, when it comes to separating the plan assets, many divorce decrees fail to provide adequate instructions on how the retirement plan division will occur. These drafting oversights can cause numerous ambiguities and headaches for divorcing parties and practitioners alike.
As a QDRO nerd, it pains me every time I review a divorce decree that devotes a paragraph or two, or even a whole page to how the marital home will be divided. These provisions often state how and when the recipient spouse will refinance (and the consequences of not), provide quitclaim deed instructions, and lay out a property description that will make even the most seasoned county assessor weep tears of joy. Yet, the retirement plan, which is often more valuable after accounting for an unpaid mortgage balance, receives only one sentence of attention. You know the one. It goes something to the effect of “Spouse X shall receive 50% of the martial portion of Spouse A’s retirement plan.” We recently posted about the pitfalls of using marital portion language, so this post will explore some of the reasons why one-sentence judgment language for retirement plan division can be problematic for everyone involved in the divorce process.
Before jumping into the deep end, let’s quickly get on the same page regarding the two main types of retirement plans. First, there are defined contribution plans (DC plans). A defined contribution plan (e.g., 401(k), 403(b), etc.) is a plan where employees and employers contribute to a participant’s account to fund a future, non-guaranteed retirement benefit. The retirement benefit will only be derived from the contributions and investment returns in the account based on market activities during one’s working life.
Second, there are defined benefit plans (DB plans). Defined benefit plans provide the employee with an annuity at retirement that is typically based on their years of service, salary, and a multiplier (commonly 1-2%), provided the employee meets vesting and eligibility requirements. The retirement benefit is relatively guaranteed, unlike DC plans.
Understanding the type of plan that is being divided, along with the plan requirements, is critical to preparing judgment language and a QDRO that satisfies the parties’ intent concerning their settlement terms.
In a DC plan, you will want to provide the valuation date for when the plan administrator will value the account. In addition, addressing any applicable pre-marital balances, equalizing multiple accounts, and the treatment of loans and earnings and losses is crucial. If the divorce decree is silent on these issues, it opens the door for further contention between the parties and professional liability for the divorce practitioner. For example, let’s say there is a gap between when the divorce is finalized and when the plan approves the QDRO. Failing to address earnings and losses will leave one party angry, depending on how the market is doing, because one will claim that they should receive earnings, while the other will say that if earnings are not stated in the judgment, they should not be added to the QDRO.
Further, many DC plans have default provisions for addressing silence. If a QDRO is silent on earnings and losses, some plans default to including the earnings, while others will exclude them. In either case, the plan administrator’s interpretation of the order may be contrary to the settlement contemplated by the parties. If earnings, losses, and loans are to be included or excluded, it is best practice to state this in the settlement agreement to eliminate the ambiguity created by the silence.
For DB plans, it is even more important to be diligent about tackling the ancillary plan benefits and division terms. Some of the things that can arise are cost-of-living adjustments, early retirement subsidies, post-retirement adjustments, death (both pre-and post-retirement), frozen versus true coverture fractions, and whether the QDRO should be drafted under a separate interest or a shared interest approach (For more information, read Dividing a Defined Benefit Plan During Divorce). For example, if the participant spouse dies, will the alternate payee’s benefit continue based on their lifetime, or does it terminate? This can significantly impact a retired alternate payee’s cash flow, especially when their only income is from social security and their portion of the annuity from the divorce settlement.
What about the scenario when an alternate payee is to be treated as a surviving spouse? Will the alternate payee’s survivor benefit be limited to their proportion of the award, or will they receive a benefit based on the entirety of the participant’s earned annuity? How will this impact a subsequent spouse or other beneficiary of the participant? Also, which party will pay the cost of providing a survivor benefit?
Two other essential elements to address in the divorce decree are splitting administrative fees and deciding which party will be responsible for preparing the QDRO. Many retirement plans charge administrative or review fees for implementing a QDRO. These fees can range from a couple hundred to a couple thousand dollars. You do not want to be the professional who must explain to your client why more money than they expected was debited from their award because of fees.
Second, stating which party will prepare the QDRO in the divorce decree can minimize the potential for future claims. If the order is silent on who will draft the QDRO, and it is not completed in a timely manner, inevitably, both parties will be pointing the finger at the other. I have witnessed several cases where the parties returned to court on contempt claims because the QDRO was not completed in the expected time-frame. Also, many malpractice claims have been commenced for similar reasons. It is prudent to explicitly state which party will be responsible for this task and ensure it gets done.
If reading this post made your head explode, you need not fret. We are here to assist you with developing judgment language that will fulfill the spirit of the parties’ agreement, meet the plan requirements, and give the divorcees the financial closure they deserve. Just know that it is impossible for one sentence to adequately address the issues stated in this article. Therefore, proceed with the necessary care in your next case involving a retirement plan division.
Marques Lang, CPW Member, attorney and financial professional, has worked on more than 6,000 QDRO cases, in addition to presenting QDRO-related content at statewide conferences, bar association events, and local law firms. He is also the author of Marital (un)Bliss: How to Successfully Divide Retirement Plans in Divorce.
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