What is ERISA and why is it important?
ERISA is the Employee Retirement Income Security Act, a federal statute initially passed in 1974 and revised periodically since then. The main purpose of ERISA is to protect employees’ retirement savings in plans provided by employers by providing minimum standards for the plan fiduciaries.
It is important to note that not all employers have plans subject to the ERISA standards. Specifically, governments at all levels are exempt, as are many church plans and charitable 501(c) plans. In addition, private employers may have some plans that are subject to ERISA’s regulations and some plans that are not.
ERISA impacts family law practice when it comes to dividing retirement interests. Plans that are regulated by ERISA are called “qualified” plans. Most importantly, qualified plans are required to be divisible by QDRO. This requirement means that it is definitively possible to transfer a share of a qualified plan from one spouse to another as a part of the divorce proceedings. ERISA also provides minimum requirements for a participant to take out a loan from a retirement plan or protect a spouse’s interest in the survivor benefit during the marriage. These protections mean that during the marriage, the retirement account is fairly well protected from being disbursed without spousal consent, and the spouse must approve of someone else getting the survivor benefit. Once the divorce is final, though, those protections end. Qualified plans can still have additional rules and regulations that must be followed when dividing it in a divorce proceeding so it is important to look into each plan and know its intricacies.
Non-qualified plans are not subject to these rules and are thus not protected. They are not required to be divisible or to protect a spouse’s interest during the marriage. They may also not provide survivor benefits or require that survivor benefits be provided only to a surviving spouse and not a former spouse. A general word of advice for non-qualified plans is to tread carefully and do additional research into their specific rules.
If you have a qualified or non-qualified plan in your case and want assistance in handling it, or have other retirement issues, please contact our office at 240-396-4373.
