Retirement benefits must often be split between two individuals who are getting divorced. This arrangement may be particularly appropriate if one person has a pension plan or another type of employer-sponsored retirement plan and the other does not possess a similar plan of a similar value. It is technically a shared asset and it has to be divided (or its value addressed otherwise within the broader context of a marital estate) when the marriage ends unless the affected spouses agree to an alternative arrangement.
However, people in this situation may not have retired yet, so they aren’t receiving those pension payments. What they can do is use a Qualified Domestic Relations Order (QDRO) to define how the pension should be split up in the future. This puts a framework in place, and then the monthly payments will be split accordingly, once they begin. How much should an ex-spouse get from someone’s pension? That is often determined using the Majauskas formula.
The accrued percentage
Essentially, what the Majauskas formula attempts to do is to determine the accrued percentage of benefits that are connected to the marriage. This accrued value may not be 100% of the total value of those benefits – although it can be – so each payment has to be divided by the total value that was earned. If that sounds confusing, here’s an easy way to think about it:
First, can you take the total amount of work that was done to earn the pension plan. Maybe the individual worked for that business for 30 years.
Next, can you take the amount of time that the couple was married while the person was earning the pension plan. For instance, maybe that person had already been working at the company for 15 years before getting married. Even though the total amount of years taken to earn the pension was 30, their spouse only has a right to the benefits from those 15 years, since they are a marital asset.
Dividing accordingly gives you the marital share of the pension plan. In the example above, the marital share would be 50%. This is then divided by 50% to split up the value between the spouses. Again, using this example, the ex-spouse would get 25% of the current value of the pension plan whenever that plan starts paying out.
If you have questions about this formula – and how it could affect your property division process – don’t hesitate to seek legal guidance at any time.