What Happens to My Pension in a Divorce?

 Posted on October 15, 2019 in QDROs, Pensions and 401(k)s

In a high asset divorce, one of the most critical issues is the division of retirement accounts. When one spouse earns a pension during the course of a marriage, it is considered community property. This means any such pension is subject to division as part of the overall divorce proceedings.

Austin Court: Divorce Invalidated Previous Designation of Ex-Spouse as TRS Pension Beneficiary

Pension plans require a covered employee to designate a “beneficiary,” who will receive any remaining pension benefits upon the employee's death. Typically when an employee gets divorced, the court will issue Qualified Domestic Relations Orders (QDROs), which instructs the pension plan administrator on how to divide any accounts or benefits. A QDRO also serves to override any prior beneficiary designation that conflicts with its terms.

Even without a QDRO, however, the divorce itself may automatically revoke a prior designation of a now-former spouse as beneficiary. A recent decision from a state appeals court in Austin, Jones v. Teacher Retirement System, provides a helpful illustration of this rule. In this case, a former employee of Texas Tech passed away in 2015. He had a pension with the Texas Retirement System (TRS).

In 1977, the employee designated his then-spouse as the beneficiary of his TRS pension. The couple divorced in 2008. Under the terms of their divorce agreement, the employee retained full ownership of the TRS pension. However, the employee never signed a new beneficiary designation form.

After the employee's death seven years later, TRS notified both his estate and his ex-wife regarding their legal obligations. TRS explained that while the ex-wife was still the designated beneficiary, if it received a copy of the divorce decree, and the date of the decree was after the date of the beneficiary designation, the ex-wife would not be entitled to any death benefits under the pension.

The ex-wife sent TRS a copy of the divorce decree. TRS then refused to pay the ex-wife any benefits from the pension. This prompted the ex-wife to pursue administrative appeals through TRS, and ultimately legal action in the courts. But the ex-wife lost at every stage.

As the Texas Third District Court of Appeals explained in a September 18, 2019, opinion, Texas law is quite clear on this subject. The employee designated his wife as the beneficiary of the TRS pension during the marriage. They subsequently divorced. TRS then received a copy of the divorce decree after the employee's death. By law, the receipt of this decree invalidated the pre-divorce beneficiary designation. The ex-wife was therefore not entitled to anything from the pension.

Contact an Austin High Asset Divorce Attorney Today

Pension benefits are often a married couple's single biggest community assets aside from their home. This is why it is critical to ensure that there is no ambiguity regarding the division or disposition of pensions. If you need advice or assistance with this or any other aspect of a high asset divorce from a Board-certified Austin family law attorney, contact Powers and Kerr, PLLC, today at 512-610-6199 to schedule a consultation.

Sources:

https://scholar.google.com/scholar_case?case=5651196172068185800

https://statutes.capitol.texas.gov/Docs/GV/htm/GV.824.htm#824.101