How are pension benefits divided in Connecticut divorce proceedings?
It is well settled that both vested and unvested pension benefits are marital property subject to equitable distribution under Connecticut General Statutes § 46b-81. Bender v. Bender, 258 Conn. 733 (2001). Once it is established- either through an agreement or court order- that a pension will be divided, the valuation and distribution method must be addressed. There are generally two approaches used in Connecticut to divide a pension: (1) the present value method, and (2) the present division method of deferred distribution. Id.
Under the present value approach, the parties, or the court, must first determine the present value of the pension benefits at issue. The parties, or, again, the court, will then decide the portion to which the non-employee spouse is entitled, and award other property to that spouse to offset the value of the pension benefits the employee spouse will retain. It should be noted that although this approach may result in immediately severing the parties’ financial connection, it also puts a considerable amount of risk on the employee spouse. Indeed, if, for example, the employee spouse never receives unvested benefits, the nonemployee spouse will have received at the time of dissolution a greater share of the marital assets.
Under the present division method of deferred distribution, on the other hand, the court or the parties determine at the time of dissolution the percentage share of the benefits each will receive upon maturity, regardless of the overall value of the plan. Typically, the parties will then receive their respective shares as a monthly payment when the pension goes into pay status, e.g., when the employee spouse retires. Unlike the present value approach, the deferred distribution method imposes the risk of forfeiture on both parties in that if the employee spouse never receives the benefits, the nonemployee spouse will forfeit them as well. However, this approach also forces the parties to remain financially tied to one another for what could potentially be a very significant amount of time.
If you have any questions, contact Joseph Maya, Managing Partner at Maya Murphy, at (203) 221-3100 or directly via email at JMaya@Mayalaw.com for a complimentary consultation with an experienced Divorce Lawyer to discuss your case.