Customary?

[Brenda Wren]

Is it customary for earnings on the pre-marital portion of an account to be considered non-marital? For example, husband has $100,000 in his account on the date of marriage. Contributions of $300,000 are made during the marriage. Contributions of $5,000 are made after the marriage, prior to the QDRO. It is clear that $300,000 plus applicable earnings are marital. It is also clear that $5,000 plus applicable earnings are NOT marital. Although earnings on the $100,000 were earned during the marriage, are they typically considered part of the marital portion? I realize what the parties agree to and what the Order states are what goes. Looking for customary equitable distribution rules. Thanks!

[mbozek]

I dont understand your question. While the parties can agree on how the retirement benefits are to be divided, the plan does not have to perform complex calculations to determine the parties respective shares. Many plan admin refuse to do tracing or complex allocation of accounts/ investments gains and losses to determine the parties interest over the course of the marriage. The Plan admin can require that the qdro provide the amount of the current balance that will be divided. Alternatively the Plan Admin can charge a fee for determining the allocation of the interests.

[JDuns]

Technically, at least in Ohio, the pre marriage account balance ($100,000 in your example) and its earnings and the post-marriage contributions and earnings are not marital property. With that said, as noted by mbozek, most orders take the end of marriage account balance minus the beginning of marriage account balance and divide that amount (giving the ex a portion of the earnings on the pre-marriage account balance) for ease of communication and calculation.

I have seen some orders that calculate marital property based on the ratio of the dollar amount of contributions during the marriage to the total amount of contributions.

[Brenda Wren]

Thanks for the replies. Sorry MBozek if my question wasn't clear. I was asking the question from a personal point of view, not as a TPA. I figured it was more of a state law question than ERISA. The recordkeeper involved is TIAA-CREF and they were very willing to do the complicated calculation. The QDRO was drafted in the State of Pennsylvania and clearly stated "60% of the accumulations attributable to premiums remitted from the date of the marriage through the date of separation". To me, this language is very clear that the earnings on the pre-marital portion are NOT considered marital. However the following sentence in the Order specified estimated dollar amounts (calculated by the Alternate Payee's attorney, of course) which were in conflict with the first sentence. These dollar amounts appear to have been calculated considering the earnings on the pre-marital portion as marital. TIAA-CREF has explained to the parties that they "must follow the money" and will be providing additional documentation of their calculation. The Order also contained a provision that if any portion of the Order was deemed invalid, the rest of the order still applied. I guess TIAA-CREF interpreted the estimated dollar amounts as invalid and processed the Order anyway.