Many working professionals accrue sizeable pension benefits through their careers. If they separate from their husband or wife, they will have to share the value with their former partner.
If you’re considering separating from your spouse, you may wonder how retirement money is divided after a divorce. Unfortunately, the entirety of the funds will not go to one spouse, even if it was their job that earned the benefits.
Dividing pension benefits in New York
The first way that assets, such as pension benefits, are split is through a simple agreement between the divorcing parties. A judge must still approve the settlement, but the couple gets to divide assets how they see fit. This method can be the quickest and least expensive.
If the two people cannot reach an agreement, things get more complicated. New York is like most states in that it uses an equitable distribution method to split assets when a couple divorces. This method does not mean that everything is split 50-50; the distribution takes into consideration many factors, and the final decision may not be precisely equal.
According to the state government, the most common way to determine how to divide pension benefits is to use the Majauskas formula. It is as follows: “50% × years of service credit accrued during marriage (numerator)÷ total service credit at time of retirement (denominator)”. A divorcing couple can change the calculation if they so choose, but both sides must agree on the modifications.
If the divorcing couple cannot come to an amicable agreement and find the Majauskas formula unsuitable, other alternatives are available. For example, a cash offer could cover a spouse’s share of the pension benefits. Each case is different and may require slightly different solutions to reach an agreement that pleases everyone.