When a spouse earns a pension through his employment, he may be concerned about what the other spouse is entitled to if they get divorced. In California, a pension is considered marital property and is subject to division between the spouses upon divorce.
California is a community-property state. The Family Code states that during divorce, marital property is divided equally, with each spouse receiving half. However, this does not mean that each spouse receives a 50 percent share of each item. Rather, it is only the value of the assets divided that must be equal.
California considers a pension plan compensation for a person’s employment. As such, if any part of a spouse’s pension was earned during the marriage, it is considered marital property and will be divided upon divorce.
Dividing the Pension
California law calls for the division of pensions based on the total number of years the employed spouse has been earning the pension, as well as the number of years the spouses were married. This means that if a husband has been earning his pension for 30 years and the marriage lasted for 20 years, two-thirds of the pension (20 divided by 30) will be considered community property. Hence, the wife will be entitled to half the value of two-thirds of the pension.
Even if a pension’s value increases after divorce, the value of the receiving spouse’s share does not change. Her share is determined based on the value of the pension at the time of the divorce.
Distributing the Pension
California provides spouses two options for distributing the pension: “cash-out” and “reservation of jurisdiction.” The “cash-out” option allows the spouse with the pension to keep the whole pension. The other spouse instead receives a greater share of other marital property equaling the value of her share of the pension. “Reservation of jurisdiction” is more common in California. This distribution option requires a court order. The monthly pension amount is divided based on each spouse’s percentage, and a check is issued to each party.
Qualified Domestic Relations Orders (QRDOs), are the court orders required for “reservation of jurisdiction” distribution of pensions.The receiving spouse must file the QDRO with the pension plan’s administrator in order to be entitled to any distribution from the pension. The Employment Retirement Income Security Act (ERISA) requires that QDROs contain very specific information, including names, dates of birth, Social Security numbers, and the percentage of the pension the receiving spouse will be entitled to upon disbursement.