When you file for divorce in New York, all property acquired while you were married is subject to an equitable division and distribution. This includes real estate, bank accounts, brokerage accounts, and, to the surprise of some couples, pension benefits earned while you and your spouse were still together.
If you are divorcing on amicable terms, you can reach your own agreement on how any retirement benefits will be distributed between you. If you fail to agree and a New York court is called upon to make the decision, it will typically use the formula established in Majauskas v. Majauskas, a Court of Appeals case from 1984 that created the following guidelines for pension division:
- 50% x years spent accruing benefits during the marriage, divided by total benefits accrued at the time of retirement
For example, if you accumulated ten years’ worth of service with your employer while married and retire after 20 years of service, your former spouse is entitled to 25% of your pension (50% x 10/20).
Although commonly used, this formula is not the only option for pension division. Others include:
- Awarding a specified dollar amount. With this method, your spouse receives a locked-in amount that will not increase if your salary goes up before you retire. It also has an impact on their right to a share of your cost-of-living adjustment.
- A share that takes effect on a specific date, typically the day the divorce action commences. Your spouse’s share can be calculated using a hypothetical retirement benefit using your final average salary and benefits accrued as of that date. Like the specific dollar amount method, this approach will generally leave your spouse with a smaller amount of your actual pension because it doesn’t take into account any post-dissolution wage or benefit increases.
Many divorcing couples don’t stop to think that pensions, which don’t take effect until years in the future, are considered marital assets. You may know that the marital home, vacation home, and other assets acquired during the marriage will have to be valued and divided, but pensions and other retirement benefits may be completely off your radar, especially when they are not expected to be distributed for a number of years.
If you or your spouse have accrued pension benefits at work, seeking experienced legal counsel is essential. Division of pensions is one of the most challenging parts of marital estate distribution during divorce and tends to result in more appeals than any other aspect of the process. Jayson Lutzky is a Bronx, New York divorce attorney with over 36 years of experience. He will ensure that any division leaves you with sufficient financial resources for the future while remaining fair to your spouse. Call 718-514-6619 to learn more or to set up a free in-person initial consultation.