What happens with Pension in Divorce?

A divorcee may be entitled to a portion of their former spouses pension.

How pensions are handled upon divorce may depend on a potentially important distinction. What happens with pension in divorce may depend whether it is a “vested” or a “non-vested” pension. A pension is generally considered vested if the recipient cannot lose the pension by being fired.

If a pension is vested it is usually considered marital property.

However, if a pension is non-vested, whether or not it is marital property will vary in only a few states. Most state courts are will treat non-vested benefits as marital property that is subject to division upon divorce. But a few states find that non-vested pensions are too speculative to be included as marital property.

Missouri has held that if continued employment is is required for pension to vest, it should not be divided upon divorce. Indiana courts have also stated that the non-vested portion of the pension is not marital property that’s divisible upon divorce. But these states are in the minority.

Most other states, including California, find just the opposite. In states that do consider non-vested pensions as marital property determining the value of that property can be a problem. A common solution is to award each spouse a portion of the pension as and when it is paid.

Another important factor is whether the federal government is paying the pension. Federal law can trump state law.

Frequently federal benefits are not subject to division by state divorce court.

For those in the military what happens with pension in divorce may be different. That’s because the Uniformed Services Former Spouses’ Protection Act sets forth specific parameters that must be met before a benefit can be divided to a spouse upon divorce. This includes that the marriage must have lasted for at least ten years.

How do courts divide a pension?

If a non-vested pension is going to be divided upon divorce, determining the pension value can be challenging for the divorce court. Some factors that are often considered are: One, how long until the benefits do become vested; Two, how many years the spouses have been married; and three, whether contributions have been made to the pension by the spouses. Some courts will also postpone any distribution of the non-employee spouse’s share until after the pension benefits start.