You plan for your future and invest in your pension for your retirement. But, when your future no longer involves your spouse, what happens to those retirement benefits that were to be used for your mutual golden years?
Quite simply, all retirement benefits earned during the marriage are divided pursuant to New York’s equitable distribution laws. In order to determine how much of a plan’s benefits will go to the non-employee spouse, New York courts use what is known as the “Majauskas” formula, named after a court case of the same name.
The Majauskas formula is applied to all types of retirement plans including:
- Pension plans
- Profit sharing plans
Here’s how the Majauskas formula works:
- the actual accrued retirement benefit is multiplied by a fraction.
- That fraction uses the number of months of contributions made to the plan while married as the numerator and the denominator will be the total number of months of contributions made before and during the marriage.
- The fraction is then multiplied by one half (1/2).
- This figure represents the non-employee spouse's pro rata share of pension benefits.
How this calculation is made and how the actual distribution of benefits is accomplished can vary depending on the type of plan at issue, whether it be a defined benefits plan or a defined contribution plan.
What can make the division of retirement benefits tricky is that while the division and distribution of marital property is governed by New York state law, the distribution of benefits under many retirement plans is governed by federal laws such as ERISA. While some benefits may be divided in a final judgment of divorce, others may require what’s known as a Qualified Domestic Relations Order (“QDRO”) in order for benefits to be legally distributed by plan administrators and without incurring significant tax liability.
Regardless of the nature or amount of retirement benefits involved in your divorce, it is crucial that your New York divorce lawyer understand how these often valuable retirement assets are to be divided so that your rights will be protected. It is not an exaggeration to say that your future depends on it.
Our firm represents people throughout New York or New Jersey who are concerned with protecting their assets in a divorce. We encourage you to talk with us about your concerns. We can help you develop a strategy to safeguard your interests during the divorce process. To get started, contact Clement Law online or call us at 212-683-9551.