Dividing a retirement pension can be complicated

On Behalf of | Apr 26, 2021 | Divorce |

Although they may not be as popular as they were several decades ago, many people who live in the Columbus area still are entitled to pensions. In particular, pensions have enduring popularity among government employees and those who are retired from the military.

As a retirement plan, pensions are subject to property division in the event of a divorce. In other words, if the pension is marital property, each spouse is entitled to his or her fair share of the property. On this point, Ohio’s laws very specifically address whether and to what extent pensions of public employees are marital property.

Each spouse’s fair share could be a 50%, but an equal division is not guaranteed. What is fair depends on how an Ohio court interprets a number of factors listed in Ohio law.

The court or the couple will have to decide exactly how property will be divided so that each person gets a fair share.  If the couple decides to divide the pension as opposed to letting one spouse keep it in exchange for other property, then they may have to prepare a Qualified Domestic Relations Order, or QDRO.

Pensions present unique legal issues

Pensions in many respects are also different from other retirement plans, like IRAs or 401(k)s.

Perhaps the biggest difference is that pensions do not have a lump sum dollar value as does, say, a 401(k). Instead, they are guaranteed regular payments, oftentimes on a monthly basis, that will take place at some point in the future.

On a practical level, it is very hard to put a lump sum value in 2021 dollars on, for example, a guaranteed payment of $1,000 a month that will start on spouse’s retirement date 10 years down the road.

Complicating things even more, the person who is legally entitled to a pension may argue that not all of its value should be considered marital property.

However, the couple will need an accurate lump sum value in order to divide their property fairly.

Getting this value will often involve the help of both legal and financial professionals.