Pg 12 Flashcards
When is a pension benefit vested?
When the employee has earned the right to a pension even if he quit or is fired. This has present ownership value and can be converted to cash
When has a pension benefit matured?
If there is a present right to pay out of vested pension benefits
What happens to a matured pension benefit upon divorce?
If a person’s pension benefits matured during more than one time period (before, during, and after the marriage] then use the time rule.
This is the number of qualifying years married divided by the number of qualifying years total. I.e.: if you earn benefits for five years before the marriage, 10 years during the marriage, and five years after the marriage the math would be 10÷20 which would equal 50% of the pension being CP and 50% being SP.
So if the benefit pays $1000 a month, the employee spouse would get $750 a month [$500 would be SP and $250 would be the half interest from the CP] and the non-employee spouse would get $250 as his half interest in the CP.
When does the time rule for matured pension benefits not apply?
If the amount of the pension is not substantially related to the number of years of service. This is any time that the pension plan by its own terms uses a different measure than time on the job to qualify for benefits. I.e.: points earned for military service means the court has to figure out each point turned
If a person wants to keep working, but his pension benefit has matured, so he chooses to keep working and to postpone his pension benefits, but if he is divorcing and the non-employee spouse has a right to an immediate payment, what happens?
The other spouse can get the equivalent amount to what her interest would’ve been if the working spouse had chosen retirement. If that spouse chooses to collect her CP share then, her share becomes fixed and it doesn’t increase as the working spouse’s pension rights increase. But she does share in any cost of living increases that get added to the working spouse’s pension benefits
If a pension is unvested, what are the two options for divorce rights?
The problem is that if the pension rights never vest, then the court has nothing to allocate. But there are two options:
– the court can reserve judgement and keep jurisdiction to divide when the rights mature and then make an allocation
– the court can determine the present value at the time of divorce and allocate accordingly. The court makes an immediate division, determines the value of the pension rights at divorce, and awards a present actuarial value of half of the CP portion to each
How are matured pension benefits distributed on death when the non-earner spouse is the one that dies?
If the non-earner spouse dies: use the terminable interest rule. The CP interest reverts to the earner spouse and the non-earner spouse gets nothing.
California abolished this rule and said that the non-earner spouse gets the CP share in the pension. If the pension is controlled by ERISA [and most are], the supremacy clause requires that the federal law preempts California law and brings back the terminable interest rule
How is a matured pension benefit distributed at death when the earner spouse is the one that dies?
The surviving spouse gets the pension benefits. If there’s more than one spouse, such as an ex and a current spouse, the court uses the time rule to allocate benefits between them
How does the supremacy clause relate to matured pension benefits?
Federal law preempts state marital property law under the supremacy clause. On an essay when an asset is a federal benefit, you must consider whether it is preempted by federal law before characterizing it as SP or CP under state CP laws
What are situations that there would never be a preemption problem for?
Military pensions, supplemental benefits of railroad pensions, US savings bonds that are co-owned by the spouses, foreign services pensions, civil service pensions. These can be divided according to CP law
What are situations that there would likely be a supremacy clause problem because of ERISA?
ERISA is a federal law that regulates private sector pensions and it supersedes all state laws as far as they regulate any employee’s benefit plan. ERISA allows state law distribution of pension benefits on divorce, but it preempts testamentary transfers by a non-divorced deceased spouse.
Always ask if the state law conflicts with ERISA or frustrates it. If it is physically impossible to comply with both federal and state regulations, or state law is an obstacle to the point of ERISA, the state law is preempted. Most federal benefits are preempted by federal laws, so California CP law doesn’t apply to them. When in doubt, err on the side of preemption. ERISA‘s goal is national uniformity in pension plan administration and ensuring that retirees and their dependants get retirement income
What are federal benefits that preempt CP law and are thus deemed SP?
Armed Forces life insurance proceeds, disability benefits, Railroad retirement benefits (social security type), Social Security benefits, US savings bonds
How do you determine how disability benefits will be apportioned post divorce?
First figure out what these are meant to replace, then use the time rule to figure out the character of the disability benefits.
– If replacing wages: determine when the wages were earned
– if replacing pension plan: use the time rule
– if replacing lost wages that would’ve been gotten after divorce or separation: it is SP
– if replacing lost wages that would’ve been community: it is CP
– if the disability extends beyond the person’s normal retirement age, it is in lieu of pension benefits and is CP
Any disability payment that is gotten during marriage is considered what?
CP, but after marriage it is the SP of the disabled person
What do disability benefits do?
Compensate for loss of pay caused by premature retirement and the diminished ability to compete for employment
