Pensions Are Marital Property Subject To Equitable Distribution


The Court of Appeals has held that vested or matured rights in a pension plan, whether the plan is contributory or not, is to be considered marital property subject to equitable distribution. The basic rational for this decision is that the money that went into the pension, during the marriage, is money that would have been given to the marriage but for the diversion to the pension plan. In distributing the pension benefits, the Court may order the employee spouse to grant the nonemployee spouse survivorship benefits. Should the Court direct this course of action, the non-employee would receive the increased benefits upon the death of the employee.

How do Courts treat non-vested pension plans? The Court of Appeals held that non-vested plans do not preclude equitable distribution. The rationale is that your right to the plan is continually accruing during the years. There are two approaches to the valuation and distribution of a non-vested plan. The first is to calculate the present cash value of the pension, with a discount since the plan has not vested. The discount will take into account factors such as the pension not actually vesting due to termination of employment or other issues which will terminate the pension. The second approach is to allocate a portion of each future payment to the non-employed spouse. The Court of Appeals suggested that the second approach is best only in the event that the present value cannot be determined.

Another concern that must be addressed is how much of the plan is subject to equitable distribution. There are cases were the marriage will terminate as a result of the divorce yet, the plan will continue to grow in value. What you can generally expect is that the Court will consider at the total amount of months from the date of the marriage to the date of the commencement of the action against the total amount of number of months of employment. Therefore, where a spouse continues to work after the commencement date, which is typical, the benefits earned after the commencement date will not be subject to marital distribution.

How is the administrator of a plan to know to make payouts to your spouse and in what amount? You will need to obtain a Qualified Domestic Relations Order, better known as a “QDRO.” The QDRO must specify the name and last known mailing address of the participant and of each alternate payee covered by the order; the amount or percentage of the participant’s benefits to be paid by the plan to each alternate payee or the manner in which the mount of percentage is to be determined; the number of payments or period to which the order applies; and each plan that the order applies to.

LEARNING POINT: Evaluating a pension plan is a complicated process which one should not attempt alone. There are many different approaches in evaluating the plan and if necessary protecting your assets. If you are getting divorced and either you or spouse has a pension plan, contact us immediately to begin preparing your case.

pensions and divorce

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