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Care Needed in Dividing Pensions
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Distribution of Assets
According to the New York State Equitable distribution Law, pension benefits which accrue during the course of a marriage are assets subject to distribution when the marriage is dissolved.
Typically, attorneys will prepare agreements that set forth that one party's pension benefits will be divided pursuant to the Majauskas Formula. The Majauskas Formula derives its name from the case of Majauskas v Majauskas, 6 N.Y. 2nd 481. The case was originally decided in 1981, affirmed in the Appellate Division and then finally in the Court of Appeals in 1984, and sets forth that to determine the non-participating spouse's share in the plan one half of the participating spouse's maximum monthly retirement allowance must be multiplied by a fraction. The numerator of the fraction is normally the number of years of service accrued by the participant from the date of the marriage up to the time of commencement of the action. The denominator is the total number of years of service
Sign Agreements
After agreements are signed setting forth that the pension of a spouse is to be divided pursuant to the Majauskas formula, an Order is prepared for the court to sign, which Orders directs the Pension Plan Administrator to divide the pension. An example of the Majauskas language contained in an Order would read as follows:
"Ordered, that at the time the Participant has retired from and is actually receiving a retirement allowance from the New York State Teachers' Retirement System (hereinafter "NYSTRS"), the said NYSTRS, in accordance with the Equitable Distribution Law, is directed to pay to the Alternate Payee, from Participant's retirement allowance, one half of a fraction of Participant's maximum monthly retirement allowance prior to optional modification and prior to any withholding for taxes or other items. The numerator of said fraction shall be the number of years (and fractions thereof) of service credit accrued by Participant in the NYSTRS after ________ (the date of the marriage) and before __________ (the earlier of (i) the date of commencement of the action, or (ii) the date of separation agreement, if any), and the denominator shall be the total number of years of service credit in said NYSTRS used by NYSTRS in calculating Participant's retirement benefit at the time of retirement. The term "retirement allowance", as used herein, shall be deemed to include any annuity as well as any cost-of-living adjustment which may be paid by NYSTRS to Participant".
The language above is in accordance with Majauskas and indicates the non-participating spouse will receive his or her share of the pension when the Participant is actually retired and in receipt of monthly pension payments. This is known as a "shared" interest, requiring the non-participating spouse to wait until the Participant is retired to begin to receive monthly pension checks.
Unfortunately, if attorneys cite in an agreement that a pension is to be divided pursuant to the Majauskas formula the effect is to delay the receipt of pension benefits to the non-participating spouse, even though the former spouse reached retirement age, but has decided to continue to work. For example, if a plan allows the Participant to elect early retirement and start receiving pension benefits at 55 year of age, the non-participant spouse will still have to wait until the Participant actually retires, which in most cases could be another ten years, when the Participant becomes 65 years of age, before realizing any benefits.
To protect the non-participating spouse, the agreement reached by the parties should set forth that the Non Participant has a "separate" interest. A separate interest provides for the actual pension benefit to be divided such that a portion of the benefit is available to the non-participant spouse as soon as the Participant is eligible for retirement (even if the Participant continues employment).
By invoking the Majauskas formula without more, the parties are stipulating that the distribution of the pension will take effect upon Plaintiff's retirement. To have the right to elect to receive payment from the pension plan when the Participant reaches the early retirement age, the agreement must specifically provide that the non-participant has a "separate" interest.
Structured Data, Review
Title: Care Needed in Dividing Pensions
Reviewed by Ira Bierman on Feb 16
Summary: Equitable Distribution and Dividing Pensions
Description: According to the New York State Equitable distribution Law, pension benefits which accrue during the course of a marriage are assets subject to distribution when the marriage is dissolved.
Care Needed in Dividing Pensions, 5.0 out of 5 based on 1 rating
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