In the first installment of what is planned to be a series on dividing retirement / pension benefits during a divorce settlement, we look briefly at the common questions of dividing retirement and pension plans between spouses. The parties’ retirement benefits is an important consideration when equitably dividing marital property, because, like the marital residence, retirement benefits are often the largest asset or assets of the parties. Therefore, dividing these plans or funds becomes enormously important. So, let’s now address some common questions.
Is my retirement / pension considered marital property?
As the intro gave away: yes. Just as with any other asset of value that is acquired during the marriage, generally, retirement benefits accrued during the marriage are considered to be “marital assets” and must be divided equally between the parties. If a spouse is working during the marriage and this results in the accrual of retirement benefits, the law sees it as if the non-working spouse contributed equally to the creation of those benefits.
This frequently makes it difficult for a court to carry out its statutory mandate of dividing all marital property equally. Technically, the non-working spouse is entitled to at least a portion of the employed-spouse’s pension fund (as marital property), but the money may not be easily accessible at the time of divorce. Because courts like to maximize the value of all retirement and pension funds, it is normally preferable to avoid causing the withdrawal of the accrued monies, and leave the fund growing in the name of the working spouse. Fees, penalties and taxes can often destroy a pension that is withdrawn when it is not fully matured. But, the problem is that sometimes there simply isn’t other marital property to award to the other (non-earning) spouse at the time of the divorce that will adequately compensate that spouse for his or her rightful portion of a retirement fund. For this reason, valuing and dividing retirement benefits should be one of the first issues contemplated by a divorcing party.
Is it true that my spouse is entitled to half of my pension?
No. Not always. Only the portion of the retirement fund that was contributed to or earned during the marriage is considered “marital property” and subject to division between the parties. The portion of the retirement fund that was earned by the working spouse while unmarried is considered that party’s separate property and the other spouse has no interest in that money. Therefore, the first step is to determine what portion of the retirement fund is marital and what portion is separate property.
How do you value the portion of the retirement fund that is considered “marital”?
In determining the portion of a pension or retirement plan that is considered a “marital asset” and subject to division between the parties, the court should calculate the ratio of the number of years the employed-spouse worked during the marriage to the total number of years he or she worked at the qualifying employment to earn the pension. Only the portion of the pension that was earned during the marriage is a marital asset, and the spouse of the employee is only entitled to a proportionate share of the marital asset.
Example – Employed spouse works 25 years to earn a vested pension of $100,000. 10 of these years were worked during the marriage. This equates to a 40% ratio, and only $40,000 of the pension is a martial asset. Because the division of marital property always begins with an equal division, the non-employed spouse would typically be entitled to $20,000 in this scenario.
Now, assuming the court doesn’t want to destroy the fund if it would be better for the employed spouse to contribute for 30 years, you see where it could be difficult to off-set this amount with other marital property? How many couples have $20,000 (in liquid form, moreover) lying around to award the other spouse his or her fair share of this fund at the point of divorce?
Are Social Security Benefits Divided?
No. Not directly, anyway. Social security retirement benefits are not considered marital assets to be divided when a couple divorces. A court cannot distribute a portion of one spouse’s SS benefits to the other spouse directly. However, the court does consider the SS benefits when making an equitable division of retirement benefits overall – See Smith v. Smith (1993, Franklin Co) 632 N.E.2d 555 (“while not divisible as a marital asset, SS benefits must be considered when equitably dividing pension benefits”).
Are State and federal retirement plans treated differently?
Yes. The law related to state and federal retirement plans will be the subject of a later post. There are specific rules that govern certain public-forms of pensions, such as military pensions, State pension plans (e.g., PERS) and deferred compensation plans. Those forms of retirement benefits are impacted by specific federal and state statutes that must be consulted where applicable.
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I am doing research on divorce. Can you tell me in what year pensions were introduced as marital assets? I have looked on the internet and find quite a bit of information but not the year they began to be included in the division of assets. I would appreciate your help with this! Thank you.
I was sole supporter for 38 years – I now collect SSDI for multiple disabilities – my wife does as well had heart attack at 45 in 1999…..my monthly amount is five times hers…..if we were to divorce would she be eligible to my ssdi – it is my only source of income – we own a co-op together and I will probebly leave her there and have to move out so……rent alone in the NYC Queens area averages 1800- 2000/mo
Thank you for this article. I am in the exact delimma, that is, the Family Law Judge wants to give my wife a portion of my pension based on the number of years we have been married (13) vs. the number of years we were married while I worked (10). I have been retired for 3 years. Is there a case you know of where it was ruled as you say?
Why would you leave her after 38 years?????? Where do you think you are going with your multiple disabilities??? You better stay with her.
Check Ohio case : 09-COA-018 Obar v Obar. No offset was allowed even when argued both ways. The court decides what the court wants not what is right. The real reason there was no offset allowed was so that the defendant could get more money from plaintiff. Oh and by the way, she got away with not paying child support too and never provided documentation. Can you say bias in the court!
Why should a so called wife receive half her husbands pension when by every definition of a wife was never fulfilled in the marriage ? Both party’s have been living their own lives for the last 20yrs now he wants out . Why should she get anything when she contributed Nothing in return!
How do we go about getting devorced laws changed? And when was the last time the law was updated to reflect the times ? Women don’t even cook and clean anymore ! They have careered ! L.o.l.
Hi Jaye, I saw what you said to AG about leaving his/her spouse after 38 yrs. Sometimes a persons sanity means sooo..much more. I know, I was married for 34 yrs! Hang in there AG. Do what you feel is best!
can l take my exwife to count to get her half of my pension lowered it been 11yrs
My ex-husband and I were divorced many years ago – after I had worked full time to keep him in college, and insisted that he get his degree when he wanted to quit – and after 15 years of marriage and 2 children later… he never declared our Retirement account from the company he worked for all our married life but the college years.
All his working career till he retired – as a multi-millionaire.
Instead, I was left injured (by him as a ‘going away’ present) and have spent years in a wheelchair. I am now dependent (at 76 yrs old) on half of his Social Security (I was unable to work any more) to pay for everything, including medications that Medicare does not pay for.
Of course, it does not, and I am left facing complete bankruptcy with no options….other than what the Law stated back then: that I am entitled to half our Retirement.
I am not interested in any of his ill-gotten gains, or anything else but that which I had worked so hard for, and which the Law said I was entitled to.
At this point in my life, it is my last hope.
I have no assets, and cannot afford a Lawyer, and with his moneyed Lawyers, they would be eaten alive anyway.
I do not want to contest anything in our settlement agreement (as Retirement was never mentioned or declared).
I just want to live my few remaining years in peace.
So my Question is: How do I request the Court to simply enforce that Law – nothing else – effective immediately?