The Division of Retirement Benefits in a New York Divorce
All types of marital assets may be divided in divorce, from the marital home to a business to bank accounts. One of the most common property issues in New York divorces involves retirement benefits, which may be a large part of your marital property. Under New York law, retirement benefits are subject to equitable division in a divorce.
In general, there are two basic types of retirement plans:
- Defined benefit plans, which are funded by your employer promising a specific monthly benefit at retirement
- Defined contribution plans, based on how much you and your employer contributed to your retirement account, such as 401(k)s, ESOPs, SIMPLE IRAs, SEPs and profit sharing
Retirement benefits are protected by ERISA, but they can be divided and assigned to a spouse, ex-spouse, child, or dependent in certain cases such as a divorce. To divide pension plans you need a Qualified Domestic Relations Order, known as a QDRO and pronounced “quadro,” or a Domestic Relations Order (DRO) in the case of government plans.
How retirement benefits are divided varies, but there are several options:
- Majauskas formula which calculates half the portion of the pension earned during marriage
- Flat dollar amount
- Modified Majauskas formula with negotiated factors
- Share calculated as of a specific date, usually the date the spouses filed for divorce
The Majauskas formula is the most commonly used formula for dividing retirement benefits. A spouse’s share is calculated by dividing the years of service credit earned during the marriage by the total service credit at the time of retirement and then multiplying that number by 50 percent. Although this is the most used formula, it is often modified by the court or adjusted by the spouses in divorce negotiations.
Dividing retirement benefits and properly completing a QDRO is not a simple task, but it is a very important one. With 25 years of experience, attorney Lauren B. Abramson can provide the guidance you need when dividing your property and in all aspects of divorce in Westchester and Putnam counties.