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Pensions,
retirements & 401Ks
Pension and retirement benefits are a form
of employment compensation and therefore the same as earnings
during the marriage. Therefore, whether a pension or retirement
benefit is or is not community property (all or some of it)
depends on the employee's marital status (married, separated,
etc.) at the time the employee performed the services. In other
words, benefits are community property to the extent they were
earned during the marriage.
The word "earned" is important because it
doesn't necessarily mean the same as "received". Money can be
earned before marriage but technically received after the
parties are married – in such a situation, that portion of the
pension may not be community property. The converse is also
true. If a pension is earned during the marriage, it doesn't
matter that it is paid after separation. In such a situation,
we must determine what portion of the pension was earned during
the marriage as that portion is generally community property.
The current law on pensions and retirements
is this: Subject to contractual limitations within the plan
itself, California Family Code section 2610 requires the court
to make whatever orders are necessary or proper to ensure that
each party receives his or her full community property share in
any retirement plan, whether public or private, including all
survivor and death benefits.
The court may do any of the following:
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(1) |
Order the division of retirement benefits
payable upon or after |
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either
party's death in a manner that meets the equal division of
community property interest in the benefits. |
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(2) |
Order a party to elect a survivor benefit
annuity or other |
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similar election
for the benefit of the other party, as specified by the
court, in any case where the retirement plan provides for
such election. |
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(3) |
Upon the non-employee spouse's agreement,
ordering the |
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division of
"accumulated community property contributions and service
credit" in public employee retirement plans, as provided
under the laws regulating those plans. |
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(4) |
Order a retirement plan to make payments
directly to a |
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nonmember
party of his or her community property interest in
retirement benefits. |
The rules may vary depending on whether the
pension is subject to ERISA or not and whether the plan is
private or public (for public employees).
California law relating to 401(k)
plans are also similar. To determine the community property
share that is to be divided between the parties, we must look to
the amount of money earned within the 401(k) during the
marriage. This of course includes both actual money placed
within the 401(k) as well as interest on that money. Note also
that interest earned after separation on money that was
deposited within the 401(k) during marriage is generally also
community property.
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