Frequently Asked Questions: Retirement Account Vesting in Colorado Dissolution of Marriage Proceedings

Vesting refers to a participant's nonforfeitable ownership interest in retirement plan benefits. When a participant is fully vested, they hold an unconditional 100% ownership right to the benefits accrued in the account. Partial vesting means the participant has a nonforfeitable right to only a specified percentage of employer contributions, while employee contributions are always fully vested.

Attorney Writer’s Practice Experience: Vesting status is important in dissolution cases because only vested benefits are subject to distribution. Always obtain current vesting information from the plan administrator before negotiating property division.

Yes. Employee contributions to any retirement plan are immediately 100% vested upon contribution. The participant retains full ownership of all employee contributions plus any earnings attributable to those contributions, regardless of employment duration.

Federal law establishes maximum vesting schedules for qualified retirement plans. Employer contributions must vest either at 100% vesting after three years of service, or at least 20% after two years, 40% after three years, 60% after four years, 80% after five years, and 100% after six years.

Upon termination of employment, the participant forfeits any non-vested portion of employer contributions. The participant may withdraw or roll over the vested percentage to another retirement plan.

Practice Note: Forfeited amounts typically remain in the plan and are reallocated among remaining participants or used to reduce employer contributions.

Yes. Retirement benefits earned during marriage are presumptively marital property subject to equitable division under Colorado law. C.R.S. § 14-10-113. Colorado follows the "time rule" or coverture fraction method to determine the marital portion of retirement benefits. Benefits earned before marriage or after the decree are generally separate property.

C.R.S. § 14-10-113 requires the written agreement to include:

• The full legal name of the retirement plan
• The participant's name, Social Security number, and last-known mailing address
• The alternate payee's name, Social Security number, last-known mailing address, and relationship to the participant
• A formula for dividing the retirement benefit (e.g., a coverture fraction based on months of service credit acquired during marriage)

Practice Note: Dividing orders are prepared by attorneys or accountants who specialize in dividing orders. Most attorneys do not prepare them due to the specialized nature of the variety of retirement plans.

Yes. ERISA requires that each qualified pension plan provide that a participant's right to their normal retirement benefit is nonforfeitable upon attainment of normal retirement age, regardless of the participant's years of service at that time. 29 U.S.C. § 1053(a). "Normal retirement age" is defined in the plan document and is typically age 65, but may be earlier.

Yes. Under C.R.S. § 14-10-114, pension payments and retirement benefits actually received that have not previously been divided as property in the dissolution action are included in gross income for purposes of calculating child support and maintenance. If retirement benefits were divided as property via QDRO or written agreement, the portion allocated to the alternate payee should not also be counted as the participant's income for support purposes.

No. A QDRO cannot require a plan to provide any type or form of benefit, or any benefit option, not otherwise provided under the plan. Similarly, a QDRO cannot require the plan to provide increased benefits determined on the basis of actuarial value. 29 U.S.C. § 1056(d)(3)(D).