For many divorcing couples, one of the larger and more important assets is often retirement benefits. To the extent the pension or other retirement asset was earned during the marriage it is community property and subject to division in the divorce, while whatever portion was earned before the marriage of after the date of separation is not. Assessing how much of a retirement benefit should go to a former spouse can involve some complicated calculations.
An example of a couple dealing with this issue was the recent case of Joseph and Cathye. Joseph was a 30-year veteran of the Los Angeles Police Department when his pension became effective in 2004. From 2004 forward, Joseph continued working for several years under a deferred retirement option plan. Eventually, in 2009, Joseph transferred all of his pension funds into an IRA. That sum was $700,000.
From 1984 to 2011, Joseph was married to Cathye. A key issue in the divorce was the division of Joseph’s pension funds. In this case, the wife’s portion was calculated using something called the time rule. The time rule meant that the court took the time that Joseph worked for the LAPD during his marriage and divided it by Joseph’s total time of service. The court then multiplied that fraction by the husband’s monthly pension amount. The amount yielded from that math equation was the community property portion of the pension, which meant that Cathye got one-half of that amount.
In this couple’s situation, Joseph earned pension benefits while working for the LAPD for 30 years. Of those 30 years, almost 20 years elapsed while he and Cathye were married. This meant that the pension was one-third the husband’s separate property and two-thirds community property. Since the wife was entitled to half of the community property, that meant she got one-third of the pension.
Cathye eventually appealed this outcome. In her appeal, she argued that the lower court was wrong to use the time rule to calculate her portion of her husband’s pension. Specifically, her appellate argument was that the time rule didn’t sufficiently protect her interest, given the timing of the husband’s contributions to his pension. In the lower court, the wife had evidence that the husband contributed $200,000 to the pension and that only a small fraction of that total was made before the marriage. Her argument was that, since Joseph made more than 87% of his contribution to the pension while they were married, the law should give her more than just 1/3 of the pension.
The wife lost her appeal. The appeals court ruled for the husband because of the nature of the pension benefits that the husband received. The husband received pension benefits “based not on the monetary value of his pension contributions, but on the length of his employment with the LAPD and his average salary during the final year before retirement.” Given this system for calculating the employee’s pension benefits, the time rule was the correct way to divide those benefits between the employee and his wife.
As you contemplate going through a divorce, there are multiple ways to complete the process and achieve a workable solution. With offices throughout the San Francisco Bay Area, divorce lawyer Lorna Jaynes provides innovative options to clients dealing with issues related to divorce, including mediation and collaborative divorce.
To find out how we may be able to help you, contact our office online or call (510) 795-6304.
More blog posts:
Dividing Retirement Accounts in California Divorce Cases – In re Marriage of Keitany, Bay Area Divorce Lawyer Blog, Aug. 12, 2015
The Role of Retirement Benefits in California Divorce Cases – In re Marriage of Green, Bay Area Divorce Lawyer Blog, March 6, 2014
Photo credit: TaxRebate.org.uk, Public Domain (via flickr)