Do I Still Receive Part of My Spouse’s Retirement Benefits?

Many San Diego clients come from marriages where one spouse was the primary wage earner, while the other stayed home to raise the children. The stay-at-home spouse now worries that the divorce will leave him or her without long-term security. Even though in California, spousal income is community property and distributed equally, there is still a question of whether the division of property entitles the stay-at-home spouse to a share of the other spouse’s pension benefits or stock options. Below are some questions that clients often ask a San Diego divorce attorney.

Am I entitled to a share of my spouse’s pension benefits if he joined the pension plan before our marriage?

Generally, yes, per California Family Code section 2610. What matters is whether your spouse’s retirement benefits continued to accrue during the years you were married. If at the time of divorce, your spouse was eligible to retire, the court would use proration formula to determine your share of the benefits. The proration formula divides the years you were married and your spouse’s benefits accrued by the total number of years your spouse was part of the pension program. The result is a percentage that represents the community’s share of that pension.

Thus, if you were married to your spouse for 15 years and during thos 15 years your spous’s benefits were accruing, and if your spouse was employed and also accrued benefits from that same employer for a total of 30 years, the community’s share would be 15/30, or one half of the pension benefits, and you would be entitled to half of that, or one fourth.

What if my spouse is eligible to retire, but chooses not to? Does that affect how much I receive?

No, because your spouse’s pension benefits mature at the time he is eligible to retire, not when he actually retires.

What if my spouse is not eligible to retire at the time of our divorce?

You would still be entitled to receive half of the community’s share of your spouse’s pension benefits. Tthe court could issue an order for you to receive your share when your spouse is eligible to retire. Some divorcing parties may agree that the spouse with the pension may “cash out” the other spouse, but a court could not make this type of an order.

Do stock options work the same way as pension benefits?

Yes, in the sense that you receive a share of your spouse’s stock at the time it matures, or “vests,” based on the number of years you were married. The difference is in the way your share is calculated. The portion of community property is based on the intent of the employer who granted the option. If the court finds that the employer awarded the stock option to reward your spouse for past services, then it uses the Marriage of Hug formula, which calculates community property based on the date your spouse started working. If the court finds that the employer awarded the stock option to encourage your spouse to stay with the company, it uses the Marriage of Nelson formula. Marriage of Nelson calculates community property based on the date the options were first granted. While both formulas can be a little confusing, what matters is that the stay-at-home spouse is entitled to a portion of the stock option.

If my spouse receives severance pay, would I be entitled to a share?

There is no clear-cut rule for severance pay. Some have argued successfully that it is not community property because it replaces lost income the spouse would have earned after the divorce. Others have argued successfully that it is community property because it was paid for by employment during the marriage.

If you are in the middle of a divorce and have questions about pension benefits, stock options, and other retirement issues, find a knowledgeable San Diego divorce attorney who can prepare you for what to expect.

Do stock options work the same way as pension benefits?

Yes, in the sense that you receive a share of your spouse’s stock at the time it matures, or “vests,” based on the number of years you were married. The difference is in the way your share is calculated. The portion of community property is based on the intent of the employer who granted the option. If the court finds that the employer awarded the stock option to reward your spouse for past services, then it uses the Marriage of Hug formula, which calculates community property based on the date your spouse started working. If the court finds that the employer awarded the stock option to encourage your spouse to stay with the company, it uses the Marriage of Nelson formula. Marriage of Nelson calculates community property based on the date the options were first granted. While both formulas can be a little confusing, what matters is that the stay-at-home spouse is entitled to a portion of the stock option.

If my spouse receives severance pay, would I be entitled to a share?

There is no clear-cut rule for severance pay. Some have argued successfully that it is not community property because it replaces lost income the spouse would have earned after the divorce. Others have argued successfully that it is community property because it was paid for by employment during the marriage.

If you are in the middle of a divorce and have questions about pension benefits, stock options, and other retirement issues, find a knowledgeable San Diego divorce attorney who can prepare you for what to expect.