Dividing a Pension in Divorce and the Survivor Annuity

Oftentimes when parties get divorce, one of the biggest assets that they have accumulated is the pension of one or both of the spouses. In a Pennsylvania divorce, the pension portion that accumulates during the marriage is what is considered marital. There may also be a non-marital portion for the years of service prior to the marriage or the years of service after the marriage. When getting divorced, there are two methods of getting each spouse their share of that pension. One method is to do a percentage distribution of the marital years. When this method is use, the spouse receives a percentage multiplied by the number of years married that the pension accumulated divided by the total number of years that the pension accumulated. This is usually distributed by a separate document called a Qualified Domestic Relations Order which is often paid to and drafted by a company or firms that handles QDROs. The other method of distribution, and the preferred method by the Court (according to case law) is an offset. Under this method, the marital portion of the pension is assigned a dollar value based on a report prepared by a company who does pension valuations. This dollar value of the pension can then be swapped with other marital assets as an offset.

One often overlooked part of a pension is the survivor annuity. If a party has a pension, then the party who has the pension is given the option at retirement to select from several different options upon their death. This could include no survivor, a 75% survivor, 50% survivor, etc. This survivor benefit election is important in that if no survivor is elected, the one spouse will receive nothing upon death of the party who holds the pension. If a survivor benefit is elected, it reduces the monthly payment of both spouses when they receive the pension. Since only the spouse who will continue to receive the pension upon death of the pension holder will benefit, the surviving spouse has an asset known as the survivor benefit annuity which must be valued separate and apart from the principal of the pension. It is something that should be addressed at the time of divorce as once the pension is in pay status this election cannot be changed.

For additional information see: /Family-Law-Divorce/High-Income-Net-Worth-Divorce/Pensions-in-a-Divorce/