“vesting” and the division of retirement plan assets in a divorce

What, if anything, does “vesting” mean in connection with the division of retirement plan assets in a divorce?
Vesting means ownership. If a retirement benefit/account is 30% vested, that means that the participant owns 30% of the benefit/account. However, should the participant remain in the Plan, that vesting could eventually reach 100% (since vesting grows with each year of Plan participation).

So, how does that affect division in a divorce? First, if a QDRO is used to divide the benefit/account, vesting is typically ignored because the deferred sharing of the benefit/account will most likely occur when vesting is 100%. Second, if the valuation method is used, vesting may be “considered” because the valued benefit/account will typically be offset against other marital assets at a time when vesting may be less than 100%.”Considered” means the probability of the participant spouse remaining in the Plan till full vesting occurs and that must be part of the valuation assumptions discussion.

For more questions about divorce pension rights please visit our frequently asked questions

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