Maryland Divorce Lawyer: Dividing that Pension

Whenever a long term marriage comes to an end it is likely that the parties have accumulated significant retirement benefits. These benefits can be in the form of a pension or retirement accounts such as 401(k) or 403(b). Others may have individual retirement accounts or annuities set up.

As a Maryland divorce lawyer, I know that these retirement benefits can become a source of discord as the parties dissolve the marriage and divide the accumulated wealth.

To determine what portion of the pension was earned during the marriage and thus is marital we apply the coverture fraction method. The Participant is the party entitled to receive the pension while the spouse would be the alternate payee.

The coverture fraction is a mathematic formula used to simplify the task of distinguishing the pension benefits earned during and prior to the marriage.

For example, let’s say the Participant’s pension benefit is $2,000/month and the parties were married for twenty years out of the thirty years Participant accrued benefits under the Plan.

The marital portion is calculated by multiplying the monthly pension amount by 20/30.

$2000 x 20/30 =$1333.33.

Once you determine the marital portion, then you have to determine what share the spouse is entitled to receive.

To compute the shared due to the spouse/alternate payee we use what is known as the Bangs/Pleasant formula.

Take the marital portion multiply by the percentage share the alternate payee is entitled to.

Who determines what percentage the alternate payee is entitled to? This can be achieved through negotiation amongst the parties.

But if an agreement cannot be reached, then a court can award a percentage that it deems fair and equitable after a trial.

In our example, if the parties agree to a 50-50 split on the marital portion, then the alternate payee is entitled to $666.66.

 

$2000 x 20/30 x.5 =$1333.33.

To recap, you need to first determine the marital portion of the pension and then determine what share the alternate payee is entitled to if any.

This scenario considers the division of a pension in isolation and does not take into account other assets and factors that can play a role in a divorce case. Therefore, it is meant for illustration purposes.

If you have a question regarding a pension or retirement account, contact a knowledgeable Baltimore, Maryland divorce lawyer for help.