The Grey Area: How Retirement Funds are Split in Divorce Cases
A Pension is probably the biggest amount you and your partner will need to divide when you decide to divorce. According to the American Academy of Matrimonial Lawyers’ survey in 2016, retirement plans are one of the top three most contested items in a divorce, second to alimony. What’s surprising is that your pension can be divided even while you’re still paying for it.
Keeping this in mind, the state of New York has put special rules in place to keep the split fair. Learn how divorce can affect your retirement funds.
A Pension is Marital Property Subject to Equitable Distribution
The Office of the New York State Comptroller says that retirement benefits are marital property that can be split between you and your ex-partner when the marriage ends. Your ex may even get benefits if you pass away before fully paying off your plan, as you need to name him/her as a beneficiary in your pre-retirement death benefit. It’s also possible that once you do retire, your ex-spouse may get a fraction of your cost-of-living adjustment (COLA).
You Need a Domestic Relations Order for It
In order to effectuate the division of a pension a Qualified Domestic Relations Order is required to be signed by your Judge and forwarded to your plan. The NYS Comptroller has an online form you can use to draft a DRO however most Attorneys hire outside companies to prepare them. While the form itself is easy to follow and fill out, it’s best to have your divorce lawyer guide you through it and ensure that the information you type in is correct.
Know the Payment Formula
The often used calculation for the amount you’ll file for your DRO is the Majauskas formula, which was made by the State Court of Appeals for the Majauskas V. Majauskas case, which is 50% (service credit obtained during marriage/total service credit upon retirement). This equation can also be modified if both parties wish to negotiate the amount.
Both parties can also ask for a “date-specific share,” in which the New York State Retirement System calculates the benefit according to the participant’s average salary and service credit on a specific date, usually the date the divorce was filed. This value won’t increase according to your salary after separation.
Ex-partners can also negotiate for a flat dollar amount that, like the date-specific share, won’t change in value if there are any increases to the participant’s salary or services after divorce.
It Needs a Fair Amount of Legwork
You can even double check it with your county clerk office’s matrimonial bureau to see if your DRO is eligible. If not, they’ll send it out, and you can work on revisions with your lawyer. Once you’ve finished filling it out, and your lawyer and the matrimonial bureau have double-checked it, submit the form to your judge for review.
After the judge approves your DRO, you need to submit it to the plan administrator of your Pension. They’ll calculate the amount of money that will go to your ex-partner and start payments.
Splitting your pension with your ex-spouse may not be desirable, but the judge’s ruling is final. The State of New York gives multiple, flexible options, however, to help you negotiate the amount the other party will get.
Plan Your DRO With a Capable Lawyer
Splitting assets can be confusing to navigate if you don’t have an experienced lawyer with you. The Law Offices of Ian S. Mednick, P.C. is ready to help you file for divorce in Long Island. We always make sure to give our clients personalized attention and suitable representation in court. We’ll guide you through the legal process and answer any questions you may have for your case.
Contact us today to get the legal representation you deserve.
