NCPA - National Center for Policy Analysis

Former Spouses Meeting Again In Court Over That Pension

March 17, 2000

The epic stock market boom has swelled the value of workers' retirement plans and that has led to an unexpected development -- long-divorced couples again involved in judicial proceedings as one tries to seize a larger share of the other's pension, stock options or 401(k) retirement plan.

Experts say the biggest prize in divorce cases used to be the real estate involved. But that asset has now been dwarfed by the value of retirement benefits.

  • The California Supreme Court ruled last year that a woman who had been divorced from her former husband for nearly 16 years should get a share of his early retirement benefits.
  • Nonemployee spouses are ordinarily entitled to a share of their spouse's pension upon retirement -- and the longer the marriage, the larger the share the nonemployee spouse's will be.
  • If retirement isn't imminent at the time of the divorce, the court typically estimates the present value of benefits expected in the future.
  • But settlements reached five, 10 or 15 years ago could never have anticipated the buoyant effects on pensions of the stock market boom.

Consequently, courts disagree over what to do about it. Courts in some states -- including those in Texas and Florida -- say the nonemployee spouse doesn't deserve a share of the increased benefits. But state courts in New York, New Jersey and California have ruled in favor of the nonemployee spouse in similar cases.

Source: Margaret A. Jacobs, "As Workers' Pensions Swell in Value, Ex-Spouses Demand a Share," Wall Street Journal, March 17, 2000.


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