With the rising cost of health insurance, when negotiating Settlement Agreements, the health insurance part is becoming more significant. Often couples discuss staying with the Settlement Agreement and not filing a divorce action so that they can still be covered under their spouse’s employer-provided health insurance. The cost of COBRA coverage is generally much higher than an employer provided plan, so staying with the current plan can result in a greater savings. So more couples are staying with the Settlement Agreement and not filing for divorce immediately, because most plans allow you to cover your separated spouse with health insurance.
On the surface, the decision to separate or divorce appears to be just a decision about health insurance, but it is actually much more than that. It is also a decision about delaying the division of your retirement plans. Here are some of the questions you need to discuss in mediation, if you are not filing for divorce right away:
1. When is the valuation date dividing the marital interest in the retirement plan?
2. Is there protective language in the Agreement that prevents the employee from withdrawing more than 50% of the account until it is divided?
3. Are there limitations on the ability to borrow against the retirement account?
4. Should the retirement plan administrator be notified that there is a Settlement Agreement in place?
5. Should you agree to a specific dollar amount now or when the plan is divided?
6. How is the money invested? Low risk investments, high risk investments, or moderate risk investments?
7. Is health insurance available now for the spouse who will not be covered, or when will it be available?
As you can see, just the health insurance coverage decision can be complicated and require a certain amount of discussion to identify all areas of concern.
Which is right for you? Be sure to choose a mediator that has the experience and knowledge base to assist you in making this important decision.