Going through a divorce when you’re an employee of a large company such as Boeing can raise some unique issues that need extra attention. Compensation packages at Boeing tend to be multi-faceted, as are pensions and retirement plans. As a Boeing employee, it is thus helpful to understand what may be involved in your divorce as you embark on the process. In addition to consulting with an Alabama divorce attorney regarding your situation, here are a few issues to be aware of.
Boeing Pension Plans and Retirement Benefits
As a Boeing employee, it is important to understand how your pensions, including any Boeing-specific pensions, will be divided in your divorce. All pensions, including yours with Boeing, will require valuation by a financial professional. You may also be required to complete a Qualified Domestic Relations Order (QDRO) to divide your pension once you reach a settlement with your spouse.
Pensions are not the only part of a retirement plan at Boeing. Likely, you also had other retirement accounts, including a 401(k), which will also be subject to division in your divorce. An Alabama divorce lawyer and one of the financial professionals they work with closely on Boeing divorces will evaluate the short and long-term implications of dividing your 401(k) plan and help you prepare a QDRO as needed.
What is a QDRO?
Married couples typically are not allowed to divide their retirement assets. Like most rules, there is an exception: divorce. However, by law, divorcing couples may not split their retirement assets without penalty. The same holds for liquidating assets; doing so is likewise subject to penalty. The only exception is dividing a retirement fund during a divorce if the couple chooses. To reach this end, each divorcing spouse must file a QDRO.
It is important to note that this area of the law can be tricky. Your ability to divide your retirement funds and the process will vary based on the company you work for and your individual retirement plan’s parameters. Every plan is different.
Generally, whether a retirement account can be divisible upon divorce depends on when individuals started it versus when they got married. If a spouse started the fund before marrying, at least part of the fund will be considered separate property. If a spouse started the fund after marriage, a court will consider most or all of its marital property and, therefore, it will be divisible in the divorce.
Which types of retirement plans do a QDRO cover?
Some retirement plans are classified as separate property, meaning the owner will have a full claim to this asset. Other types of retirement plans will be subject to division in a divorce. Qualified plans can be divided in a divorce, while non-qualified plans will go to the spouse whose name is on the plan.
If you are a gainfully employed spouse at Boeing going through a divorce, you probably have retirement assets you want to protect. Whether you keep all or part of your retirement assets will turn on what type of fund you have, of which there are many.
Though there are always exceptions, the following retirement accounts, in addition to those you may have at Boeing, are generally divisible in a divorce.
- Defined contribution plans. Account holding money contributed by both the employee (you) and the employer.
- Defined benefit plans. Accounts awarded upon retirement through a monthly stipend, although some allow for lump-sum distribution.
- Hybrid plans. Extremely common, employees can then collect their contributions plus earnings when they retire.
- Local government plans
- State government plans
- Federal government plans. Thrift Savings Plan (TSP) is a typical example.
- Federal railroad retirement plans. When divorcing, be sure to consider if you have tier-1 benefits or not.
- Military retirement plans. For those who served in the military.
- IRAs. An IRA is a retirement plan that allows for tax-free growth or growth on a tax-deferred basis.
- 401(k). A type of defined contribution plan.
- Stock shares. Some companies award employees stock as a benefit. Stocks are deemed either communal or separate property in a divorce.
Regardless of the plan(s) you have, the best way to protect your assets, including your retirement assets, is to contact an Alabama divorce lawyer. A lawyer working in conjunction with a certified financial planner can help you inventory your assets and retirement plans, figure out the specifics for each, and find ways to protect them in divorce.
How do you file a QDRO?
Filing a QDRO can be difficult because you need to fill out the forms in a specific way. You will need to locate a lot of information about your retirement plan and your spouse’s to complete them correctly. Also, to qualify for a QDRO, you must verify if the Employee Retirement Income Security Act of 1974 (ERISA) covers your retirement plan. ERISA is a federal law designed to establish baseline requirements for most retirement and health plans voluntarily set up by private companies. The Act protects individuals in these plans.
If you have a good-paying job at Boeing and a solid retirement plan, you stand to lose a lot should your spouse seek part of your plan. In some situations, you may be able to trade off assets for your retirement plan.
Because filing a QDRO can be so complicated, anyone filing one could benefit from the help of an attorney with experience handling them. After filing all of the paperwork, a plan administrator will review the QDRO to make sure it is in compliance with regulations and, if necessary, request you elaborate or make changes.
How can a QDRO help you negotiate during your divorce?
QDROs can help you plan for your future and be extremely helpful for a spouse who is not gainfully employed, does not earn much money, or earned substantially less than their spouse during the marriage. If you were always the higher-earner, you might have to give a part of your pension plan to your spouse. That said, a QDRO can help see to it that your spouse does not take more than their fair share.
QDROs can similarly help you claim your retirement plan while giving you and your spouse a fair portion of the fund. How much each party’s share is will be determined by the plan administrator. In doing so, the plan administrator will consider whether the spouse who has the retirement plan enrolled in that plan or pension before the marriage took place or afterward.
Consider, for example, whether the plan was started before the marriage took place. In that case, the duration of the marriage and the plan itself will determine what belongs to whom. Because this is typically a nuanced process, several months can pass from the divorce finalization date to the retirement plan’s final distribution.
What will a QDRO mean for your future after divorce?
You might not want to part with any of your retirement plans. However, there are situations when it is beneficial to divide your retirement fund. Giving your spouse a portion of your retirement could mean making smaller alimony payments or none at all.
There is another benefit. Once you finalize your divorce and your spouse’s and your retirement assets have been divided and distributed, you will now be able to grow your retirement accounts free and clear of your ex. The newly separate assets will be yours to draw on to support yourself in retirement.
The above reasons are why completing a QDRO is so critical; it not only frees you financially from your soon-to-be-ex-spouse but also does so mentally and emotionally. Once the administrator approves your QDRO, you can begin your next chapter following your divorce.
Stock Options for Boeing Employees
Boeing employees may have stock options requiring assessment in anticipation of division. Valuing stock options can be complicated, requiring the assistance of an Alabama divorce lawyer experienced in divorces for company employees.
Health Insurance and COBRA
Health coverage after your divorce for your non-Boeing spouse will be an important issue in your negotiations. Most likely, your spouse will be unable to remain on your health plan with Boeing but may opt to continue their coverage through COBRA for a limited time until they can secure benefits for themselves independently of you.
Relocation and Job Stability and How it May Affect Child Custody, Child Support, and Spousal Support
It is not uncommon for employees of large companies, Boeing included, to be relocated for work. While transfers can present new opportunities, a move can complicate agreeing on child custody. Where there is already a divorce agreement, a relocation could necessitate modifying an existing custody arrangement. Additional factors implicated in a Boeing relocation during a divorce are property division, child support, and spousal support.
Confidentiality
Companies do not generally love to hear one of their employees is going through a divorce, particularly a high-conflict divorce. This is because contentious divorce proceedings could result in requests for the company to divulge information they deem sensitive or confidential.
Tax Implications
No divorce is without tax consequences, and numerous ones can result from a Boeing employee divorce. At a minimum, alimony is taxable to the receiving spouse and deductible for the paying spouse. Child support is the reverse, with the paying spouse having to pay the taxes on it while the receiving spouse gets the deduction.
Additionally, there is a tax consequence whenever stocks are sold. Then, there is the issue of filing taxes jointly with your spouse or as a single filer. An Alabama divorce attorney and a financial professional they trust can assess the specific tax consequences of your divorce.
Long-Term Financial Planning
Any divorce, especially a Boeing divorce, which typically has many moving parts, requires assessing its impact today as well as its impact on the employee’s long-term financial plans. With this in mind, it’s imperative to evaluate any prospective divorce settlement so that it is in alignment with long-term financial planning for the employee’s retirement (projected retirement dates could be affected following asset division), living expenses post-divorce, and the responsibility that individual will assume, if any, for sending their children to college. An Alabama family law attorney can help.
Find an Alabama family law attorney to guide you through your divorce if you’re a Boeing employee.
Given the complexity of Boeing employees’ compensation packages and retirement benefits, employees considering divorce should consult with a divorce attorney as soon as possible to begin preparing.
At Charlotte Christian Law, our team of Alabama legal professionals understands how daunting a divorce can be as a Boeing employee. Our divorce attorneys have extensive experience handling divorces for large-company employees and can help you with yours. We have offices conveniently located in Huntsville and Birmingham to serve you. Call us today or schedule a consultation.
Jonathan Hornsby, CFP®, CRPC®, MBA, contributed to writing the section titled “What is a QDRO?” and its subsections.
