Generally, retirement benefits that accrued during the marriage are divided equally between ex-spouses. This includes defined benefit plans, such as pensions, defined contribution plans, such as 401(k)s, and many military non-disability plans. There are exceptions for short-term marriages and marriages with particularly, and financially-connected, serious circumstances of fault (think: your spouse gambled his life savings away and now wants half of yours).
By Michigan statute, all benefits, cost of living adjustments, survivor benefits, early retirement adjustments and other “bells and whistles” (what we call ancillary and component benefits) are divided in the same portion as the basic benefit awarded. This basic benefit is usually a percentage determined by the years of the marriage against the years of employment, divided by two (or, the coverture facture). For this reason, many judgments of divorce will simply read that the benefits are divided “including all benefits as set forth in MCL 552.505” (the retirement statute).
BUT this statute does not address how the benefits are divided, only which. If the judgment is silent, each ex-spouse alternate payee in the plan (the non-worker spouse) may make whatever election he or she wants. This is particularly problematic for lifetime elections that limit the participant spouse (or worker-spouse)’s ability to designate beneficiaries or make her own payment elections.
In Hudson v Hudson, _____ Mich App _____, Published Opinion of the Court of Appeals, Docket No. 322257 (Jan 7, 2006), the Court of Appeals held that because the judgment of divorce did not preclude election of a lifetime benefit, the ex-spouse was allowed to elect it.
“The parties were bound by the language of the judgment of divorce, and that the judgment of divorce did not preclude defendant’s election.” The fact that “they may have neglected or chosen not to address” the issue of their rights relative to each other’s pension plans “at the time of the judgment of divorce does not afford a basis for subsequently contesting whether the selection of an option afforded by the EDRO is contrary to the terms of the judgment of divorce. It is not. Nor does it afford a basis for finding on grounds of ‘equity’—as plaintiff argued—‘an implied term of th[e] settlement agreement’ (and therefore of the resulting judgment of divorce).”
For these reasons, it is imperative to be clear in your judgment not only what benefits are to be divided, but how. An attorney well versed in family law is essential here. Find someone who dabbles in family law and uses form judgments, and you will very likely find yourself like the unhappy ex in Hudson.