How are retirement benefits divided in a Michigan divorce?
In Michigan divorces, retirement benefits are usually the largest asset of a marriage, and can provide for both parties for the rest of their life. In Michigan every judgment of divorce must determine the rights of each party as it pertains to any vested pension or retirement benefit, any accumulated contributions in any pension, annuity, or retirement system, any non-vested pension, annuity or retirement benefits.
Any vested retirement benefit accrued during the marriage must be considered with the property settlement in Michigan while non-vested benefits don’t necessarily need to be considered where it is considered “just and equitable” by the court.
In Michigan, a non-employee spouse is usually limited to the benefit of their spouse’s retirement plan by the period of time, which the couple was married. If the employee had the plan before the marriage, a calculation will be conducted to see how much the plan has grown during the course of the marriage; this is not an easy process, and it is really a case-by-case calculation depending upon the type of plan, and the circumstances of the marriage as part of a Michigan divorce.
In Michigan retirement benefits can be divided in two different ways. First, there is what is called the offset method, which isn’t actually a division of the benefits, but gives the person non-employee spouse other assets of the marriage that are equal to the value/possible interest in the retirement benefits. The second method is called the deferred division method, which allows a domestic relations order to give the non-employee an actual interest in their spouse’s retirement benefits as part of a Michigan divorce/
If there are no other sufficient or equal material assets, then method #2 might be a couple’s only option. When a couple gets divorced in Michigan, and has to share in the benefits of a retirement plan, it could cause a lot of tension or conflict, which the parties would rather have behind them; this is where method #1 might be the better choice if possible.
In Michigan, retirement benefits under the deferred division method, can be broken into two different forms of payment. The benefits can be dispersed as a shared payment, meaning the actual benefit payments are divided as they are made, between both spouses, or as a separate payment, which essentially creates two distinct benefits for two separate participants. The type of method available in Michigan divorces is subject to the type of retirement plan, and the status of the plan at the time of the division.
In Michigan divorces, payments on retirement plans can also be periodic or lump-sum depending upon the plan, and the stage of the retirement benefit. A non-employee spouse may be able to call their own shots with disbursement or may have to adhere to the restrictions of the particular plan.
Military pension plans are subject to the Uniformed Services Former Spouses’ Protection Act (USFSPA), and allows state courts to award military retirement pay to a spouse in an Oakland County divorce. The Department of Defense will enforce payment by withholding income if necessary. If the serviceman is still active, the action will be subject to the Servicemembers Civil Relief Act, which provides for some specific protections for the serviceman.
In order for a former spouse to receive a military pension in a Michigan divorce, the servicemember and spouse must have been married for at least ten years, and the serviceman must have served for at least ten years; this is known as the 10/10 rule. This 10/10 rule does not apply for issues like child support or spousal support payments. A former spouse can receive up to 50 percent of the servicemembers disposable retirement pay, and 65 percent if child support and alimony are involved.
Federal government workers (non-military) receive retirement benefits under three different systems. There is the thrifts savings plan (TSP), which is similar to a 401(k) plan, Social Security benefits and the Federal Employees Retirement System or Civil Service Retirement System. A Michigan divorce order can affect employee annuities, refunds of employee contributions and survivor annuities.
Government pensions differ from private company pensions in a number of ways, but the benefits are still subject to division at the time of an Oakland County divorce. In Michigan retirement benefits of a state or local government must be divided by a Eligible Domestic Relations Order Act (EDRO) or a Domestic Relations Order (DRO).
Yes, in a Michigan divorce, Social Security benefits are subject to the Social Security Act, which is a federal law, because Michigan family courts do not have the power to divide Social Security benefits in a divorce. Under federal law, a divorced spouse of a worker covered by Social Security may qualify for about 50 percent of the worker’s primary insurance amount while the worker is alive.
In Michigan the divorced spouse must be 62 years old or age 60 if a surviving spouse, the divorced spouse is not remarried and the divorced spouse was married to the worker for 10 years.