What Happens to My Pension After Divorce?

When separating couples begin negotiating their financial settlements, pensions may be an essential part of the discussion. In divorces, all assets accumulated during the marriage are subject to distribution between both parties. If either have pensions that were obtained while the couple was married, it becomes part of their joint marital assets.

Dividing up pensions can be somewhat complex, since it may be hard to determine its exact value unless one is already receiving it. Values can fluctuate depending on state laws and how much of the pension was earned while the couple was married.

How Specific Laws Apply

Spouses usually receive half of what was earned while they were together. However, Pennsylvania is an equitable distribution state, and this means that assets are split up fairly, which is not always half for each person.

Denied-benefit plans are employer-sponsored retirement plans where benefits are based on salary history and length of employment, and have certain restrictions regarding the withdrawal of funds. If a spouse enrolled in a plan like this five years before marrying, the other one could not lay claim to any contributions made during that period.

If the asset in question is a government or military pension it will be regulated by a certain set of laws, and might not be subject to other ones that apply to asset distribution in a divorce. Also, if there was a prenuptial agreement signed to protect the pension, it will remain with that spouse.

How the Process Works

State divorce courts determine how pensions are divided up and if survivors’ benefits will be paid out. A court order is needed to obtain a share of a pension, unless it is Tier I Railroad Retirement or Social Security benefits. Pensions must be divided during the divorce at the same time when all the other marital assets are split up. A domestic relations order is also needed for the pension plan to start making payments to the former spouse.

Pension benefits are often paid to divorced spouses if the domestic relations order is prepared and meets certain requirements. Usually, the payments are made for the employee or retiree’s life, as well as after death. Most pensions also offer a choice between receiving a monthly annuity or a lump-sum payment. Additional options include single and joint-life payouts, and survivor benefits. It is a good idea to become familiar with all these options before heading to the bargaining table.

Alternatives for Negotiations

In the face of one party not wanting to divide up their pension, some divorcing couples negotiate with other assets. Instead of splitting it up, one spouse may offer to give the other the marital home in exchange for giving up rights to half the pension. Another option is to purchase a life insurance policy that is equal in value to the pension benefits. In divorce cases where both parties have pensions that are similar in size, they could agree to keep what they have and leave things as they are.

Bucks County Divorce Lawyers at Freedman & Lorry, P.C. are Dedicated to Protecting Your Assets

The Bucks County divorce lawyers at Freedman & Lorry, P.C. are experienced with equitable distribution of marital assets and will fight to protect what is yours. For a free consultation, call us at 888-999-1962 or complete our online form. Located in Philadelphia, Cherry Hill, New Jersey, and Pinehurst, North Carolina, we serve clients throughout Pennsylvania.