What Is the Spousal Right With a 457 Retirement Plan?

Giving up part of your retirement fund during a divorce is painful, but sometimes it's necessary. That applies to 457 plans just like IRAs and 401(k). A 457 is a workplace plan funded by payroll deductions. State and local governments use 457s for their employees, and so do some nonprofit organizations.

Community Property

In a community property state, assets you and your spouse acquire during your marriage get divided 50/50. If you start a 457 after your marriage and it holds, say, $240,000, your spouse is probably entitled to a $120,000 share. If all your contributions to the plan came before marriage, you may be able to keep it as a separate asset. You can also propose giving up a different asset of equal value. As your 457 will probably grow over time, calculating equal assets fairly is a challenge.

Non-Community Property

In equitable distribution states, you and your spouse don't have to have a 50/50 split. The goal is to divide everything fairly, not equally. In some cases, your spouse may get part of your 457, even if you set it up before your marriage, in return for you keeping something else. The divorce court may be more flexible than in a community-property jurisdiction, so keeping the entire plan may be more of an option.

Procedure

One reason for considering alternatives is that dividing a 457 is tricky. In most cases it has to be done with a qualified domestic relations order that allows you to transfer assets from a 457 without paying early-withdrawal penalties. Specific plans and states may have different rules. North Carolina's 457(f) plans for senior management don't accept QDROs, for instance. Instead the plans have their own internal rules for how to divide them up.

Beneficiary

Your spouse has one right that applies outside of a divorce, the right to be named as your 457 beneficiary. Federal law says that as your spouse, she's entitled to inherit the account if you die first. If you want to name your child or your invalid father instead, you need your spouse's written consent on the appropriate form to make it happen. The form has to be notarized to be valid.

About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.

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