Distribution of Pension Funds Through Divorce

Marital property is defined by statute as “all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action” (Domestic Relations Law, § 236, part B, subd. 1, par. c). When going through a divorce one of the assets defined as marital property to be divided will most likely be retirement funds. This could be either through a pension or a 401k depending on you or your spouses employer. Pension benefits typically represent the largest marital asset in most divorce actions. There are two basic types of pension plans: defined benefit and defined contribution. A defined benefit pension plan will define the benefit at a normal retirement age (i.e., 65 years old) which is either a percentage of the participant’s average salary multiplied by the number of years of credited service, or as a fixed dollar amount times the participants credited service. A defined contribution plan (401k) is defined by the employer and the benefit payable will be equal to the participant’s accumulated account balance at retirement. See: Valuing Pension Benefits in Divorce, 18 OHDRJ 81 (2006).

So what does this mean in regards to entitlement to pension funds through divorce? In the eyes of the courts vested rights in a noncontributory pension plan are marital property to the extent that they were acquired between the date of the marriage and the commencement of a matrimonial action, even though the rights are unmatured at the time the action is begun. (Majauskas v. Majauskas, 61 N.Y.2d 481, 485–86, 463 N.E.2d 15, 17 (1984)). A spouse is only
entitled to the funds acquired through pension or 401k that were accumulated up until divorce has commenced.

The most commonly used equitable distribution formula for a public pension was established by the State Court of Appeals in Majauskas v. Majauskas. This formula is as follows: (50% x years of service accrued during marriage (numerator) divided by total service credit at time of retirement (denominator). (61 N.Y.2d 481, 463 N.E.2d 15, 474 N.Y.S.2d 699, 6 Employee Benefits Cas. 1053). While this is common it does not mean 50% will automatically be given. Both parties could come up with a flat dollar amount or a modification to the Majauskas formula if they can come to terms with an agreement (via state comptroller Thomas P. DiNapoli).

The division of assets can be one of the most contentious aspects of a divorce. It is important to have a full understanding of what you or your spouse may be entitled to. Please contact us if you are looking for more resources regarding retirement funds and division of assets in the Buffalo, New York Area. Learn more about all of Gabriele Law’s area of practice here.

Gabriele Law PLLC
GabrieleLawPLLC.com
vcg@gabrielelawplc.com
(716)242-7200