401K Division, Quasi - Time Rule?

[Paul Mac]

What is the name of your state (only U.S. law)? Ca
I was in a 5 year marriage that ended in 2002. After huge battles and 8 years later, my 401K is still not divided. I worked for the company for 15 years but wasn't 100% vested for the first 7. I got married in 1996 when I already had 11 years with the company at which time my account had $40K balance. I changed jobs at the end of 1999 so no more contributions were going in. In 2006 thru 2008, the QDRO accountant figured out two methoeds of division. Quasi-tracing (using acct. statments) and Time rule methoed (Average of time married). Quasi tracing shows that 14% is community property. Trace methoed shows 46% is community property. As of today, the account has an increase of $7k since marriage (after some rollor coster rides). All the posts I've read indicate that $3500 (half the increase from time of marriage) would go to my ex. My ex, insists on 23% (half of the 46%) which would be close to $11000. Quite a difference. The QDRO accountant also came up with this formula that says, I was only vested for 7.5 years and the marriage was 5 years so approx. 70% is community property. Does this seem a little lopsided to anyone but me?
How can I make this fair for both of us? Without costing me even more legal fees?
Thanks in advance.What is the name of your state (only U.S. law)?What is the name of your state (only U.S. law)?

 

[mistoffolees]

What is the name of your state (only U.S. law)? Ca
I was in a 5 year marriage that ended in 2002. After huge battles and 8 years later, my 401K is still not divided. I worked for the company for 15 years but wasn't 100% vested for the first 7. I got married in 1996 when I already had 11 years with the company at which time my account had $40K balance. I changed jobs at the end of 1999 so no more contributions were going in. In 2006 thru 2008, the QDRO accountant figured out two methoeds of division. Quasi-tracing (using acct. statments) and Time rule methoed (Average of time married). Quasi tracing shows that 14% is community property. Trace methoed shows 46% is community property. As of today, the account has an increase of $7k since marriage (after some rollor coster rides). All the posts I've read indicate that $3500 (half the increase from time of marriage) would go to my ex. My ex, insists on 23% (half of the 46%) which would be close to $11000. Quite a difference. The QDRO accountant also came up with this formula that says, I was only vested for 7.5 years and the marriage was 5 years so approx. 70% is community property. Does this seem a little lopsided to anyone but me?
How can I make this fair for both of us? Without costing me even more legal fees?
Thanks in advance.What is the name of your state (only U.S. law)?What is the name of your state (only U.S. law)?

If you use the time method, I would argue that using the vesting time as the denominator doesn't make sense. Even though you weren't vested for the first 7 years, you were accumulating savings. I would therefore argue that you were contributing to the 401 K for 14 years, but were married for only 3-4 of them, so the correct ratio would be (3 or 4)/14 of the total. (I would also be inclined not to trust an accountant who can't subtract. Even if you were married at the beginning of 1996 and changed jobs at the end of 1999, that's 4 years, not 5). However, that wouldn't be my first choice. A trace method would probably be more accurate (since you probably put in different amounts of money each year and the market gained different amounts).

The easiest way would be to show the value at the time you married, the value at the time you divorced, and give him half. HOWEVER, since it's taken you so long to do that, you'd have to correct for any changes in value since the divorce. Since it's probably flat (or maybe even down slightly) since 2002, I'd show just make it simple - offer him 1/2 of the difference between the date you married and the date you divorced. If it IS up, I'd offer him his percentage of the gain (that is, if the above calculation means he gets 10% of the total, offer him 10% of any gain).

Now, is that defensible? Sure. Does that mean you'll win if you get into a legal battle? Nope. This is the kind of thing that could easily cost you 5 times as much as it's worth if you start fighting over it. So if he won't agree to the above, i'd next try some neutral person who you can both trust (pastor, paid mediator, etc) and ask them to mediate.

 

[Paul Mac]

Thanks for the response Mistoffolees. That's a good point you made about the actual marriage date which was Sept of 96' so it's only 3 years and 4 months that I was contributing. Oh, by the way. I'm the "He" and my ex is the "she". I also just talked to my lawyer (first time in two years) and he also suggested an outside party to mediate. So, I will start shopping for a QDRO accountant. Also, I have a rollover IRA that has lost about $5000 during the marriage. Does this mean she owes me $2500? She has never agreed to anything that wasn't heavily weighted in her favor. After our marrige, she shopped for a fat wallet so her legal fees are no issue for her. I'll be in debt the rest of my life.
Thanks for the respnses.

 

[mistoffolees]

Thanks for the response Mistoffolees. That's a good point you made about the actual marriage date which was Sept of 96' so it's only 3 years and 4 months that I was contributing. Oh, by the way. I'm the "He" and my ex is the "she". I also just talked to my lawyer (first time in two years) and he also suggested an outside party to mediate. So, I will start shopping for a QDRO accountant. Also, I have a rollover IRA that has lost about $5000 during the marriage. Does this mean she owes me $2500? She has never agreed to anything that wasn't heavily weighted in her favor. After our marrige, she shopped for a fat wallet so her legal fees are no issue for her. I'll be in debt the rest of my life.
Thanks for the respnses.

She's not going to have to reimburse you for the losses on your rollover IRA.

If you were actively adding money to it during the marriage, you could possibly argue that you'd like to use those losses to offset gains in the other one, but other than that, it's something you'll just have to live with.