Retirement plans, like all other assets you and your spouse share, undergo a division in a divorce. Simply put, divorce requires all the funds to be split among ex-spouses, which includes bank accounts and pension funds, among others.
We begin by determining if it counts as a property you and your spouse acquired together in marriage.
It depends on the case, but sometimes the entire retirement plan or only a part of it can be taken as separate possessions. For instance, when one party obtains retirement before entering the marriage, it is usually viewed as individual property. So, in that case, it doesn't fall under the allocation.
On the other hand, if a part of a plan is earned in the matrimony, the retirement plan undergoes an evaluation. However, that is more difficult for certain funds than others. For instance, an IRA is not too difficult to value. You only need to check the status on the day of the split. That being said, other funds, like a defined benefit plan or a non-vested pension, might not be so easy to evaluate.
If the situation requires it, you might even need to hire professional help, such as a CPA. They will be able to examine the status of your retirement plan and provide a definite answer.
The last stage of the process is allocation. While it is true that retirement plans are a bit complex, in general, it all depends on the kind of retirement fund. Again, IRAs are pretty simple. To bypass the early withdrawal tax, all you need to do is structure the transfer as a rollover or something of that sort.
But in other plans, you might need to opt for a Qualified Domestic Relations Order. It will help you split the retirement plan without facing penalties.
Ultimately, every plan comes with its own set of rules you must heed in order to bypass tax problems in case of a division.