In Washington, retirement accounts are considered assets subject to division at divorce.  The purpose of a retirement asset is to provide someone with income after his or her active working years, and to have accumulated such sums in a tax-advantageous way.  There are many varieties of retirement income vehicles.  Here is an overview of just a few common retirement assets:

1. Employer-Sponsored Defined Contributions. Each participant has his or her individual account within the plan.  The benefit to be returned once he or she retires is based on the contributions made by the employee and/or employer into the individual account, and the gains made over time on those invested funds.  The 401(k) is most common, allowing employees to contribute a portion of their salary into an investment account that will grow over time.  Less common is a 403(b) (typically offered by non-profit or educational organizations), 457(b) (plans for government or non-profit employees), and a Thrift Savings Plan (for federal employees).
2. Individual Retirement Accounts (IRAs). These are also defined plans that are not necessarily employer-sponsored.  They are opened and managed by the individual via a financial institution.  There are: Traditional IRAs (where contributions are tax-deductible, the earnings that grow are tax deferred until the funds are withdrawn, and withdrawals after 59½ are taxed as ordinary income); Roth IRAs (where contributions are not tax-deductible, the earnings grow tax-free, and qualified withdrawals are tax-free); SEP IRAs (Simplified Employee Pension, designed for self-employed individuals and small business owners); and Simple IRAs (a savings incentive match plan for employees, for small businesses where both employers and employees can contribute, similar to a 401(k) but with lower administrative costs).
3. Defined Benefit Pension Plans. These benefits are calculated under a fixed formula to determine monthly lifetime payments, not merely based on amounts contributed and performance of the investments like a defined contribution plan.  The formula usually considers the employee’s final pay level, the number of years of service with the employer, and age of retirement.

If you are undergoing a divorce, the retirement assets will need to be divided.  Splitting these particular assets in an appropriate manner is critical.  For instance, the Employee Retirement Income Security Act of 1974 (ERISA) is a federal statute that requires a Qualified Domestic Relations Order (QDRO) to divide a 401(k).  On the other hand, an IRA does not require a QDRO for division; rather, they are divided through a transfer incident to divorce, which needs to be structured in a way to avoid taxes or penalties.

Regardless of which retirement asset you own, a family law attorney at Lasher will be able to explain its significance and how best to divide the asset in a divorce.