How are retirement accounts divided in a New York divorce?

What part of a retirement plan is marital

Retirement benefits earned during the marriage are marital property, the same as a bank account. Benefits earned before the marriage, or after the divorce case starts, are generally separate.

New York's state retirement system says plainly that its pensions are marital property that can be divided at divorce. A court also considers lost pension rights when it divides property.

Pensions and the Majauskas formula

A traditional pension pays a monthly benefit at retirement, so there is often no single balance to split. New York's highest court addressed this in Majauskas v. Majauskas in 1984. Courts and plans still use that formula today.

• Marital share:. years of service credit earned during the marriage, divided by total service credit at retirement.
• Ex-spouse's share:. half of the marital share, applied to each pension payment.

The state retirement system gives this example. A member earned 18 years of service while married and retired with 30 years. The marital share is 60%, so the ex-spouse receives 30% of the benefit.

The formula is not required. Spouses can agree on a flat dollar amount, a flat percentage, or adjusted terms. Some plans can also calculate a hypothetical benefit as of the date the case started.

401(k)s and other account plans

A 401(k) has an account balance, so it is easier to value. The marital part is usually what was added and earned during the marriage. A balance from before the marriage is separate property, and so is its growth, unless the other spouse contributed to it.

Spouses can split the account itself. They can also trade, so one spouse keeps the full account and the other keeps assets of similar value. Taxes matter here, because pre-tax retirement dollars are not worth the same as cash.

QDROs and Domestic Relations Orders

The divorce judgment alone does not move retirement money. A separate order is sent to the plan. For private employer plans, it is a qualified domestic relations order, or QDRO, which must meet federal law. The plan administrator decides whether the order qualifies.

New York public pension systems use a Domestic Relations Order, or DRO, issued by the court that granted the divorce. Each plan has its own rules, so orders are drafted to fit the plan.

Automatic orders bind the spouse who files once the summons is filed, and the other spouse once it is served. From then, neither may withdraw or transfer retirement funds without written consent or a court order, though a spouse already receiving payments can keep receiving them. In mediation, spouses can agree on how each plan is divided. An attorney then drafts the order for the court and the plan.