Dividing pension benefits in a Michigan divorce: A pension plan is a contract for the payment of a fixed sum of usually following retirement. The plans are also known as defined benefit plans because the fixed sum of money is a “defined benefit”.
In a Michigan divorce, property acquired during the course of the marriage is typically divided and property acquired before you were married is not. Michigan divorce law provides that a pension benefit is property, just like a bank account and can be divided in a divorce, provided it was earned during the marriage. Any portion of a pension earned during the marriage is called the marital portion.
Sometimes, calculating the marital portion can be difficult. With a bank account, your Michigan divorce lawyer will request you obtain a bank balance close to the date of marriage and a current balance. The marital portion is the difference between the two.
With a pension benefit you cannot obtain a balance close to the date of marriage. Rather, a pension benefit changes with the number of years of credited service. So how do you calculate the marital portion of a pension benefit?
A good way to estimate the marital portion is to divide the number of years of marriage by the number of years of employment.
For example take the following into account:
Pat’s current pension value: $1000.00 per month.
Pat has been employed for 10 years and married to spouse for 5 years.
The marital portion would be (5 years of marriage /10 years of employment) or 50%. Therefore, spouse would be entitled to 1/2 of the marital portion of the pension benefit, 25% or $250.00 per month.
This formula is called the coverture fraction and is the most popular formula utilized however, it is not the only way to determine the marital portion of a pension plan under Michigan divorce law.
In fact, there are three different methodologies under Michigan divorce law to solve the problem and they are not equal. See: https://www.thedivorceguy.com/dividing-pension-benefits-not-all-language-is-created-equa/
Just because you have been awarded 50% of the marital portion may not be good enough. The methodology should be included in the Judgment Divorce to ensure that the division is fair.
For additional information on Judgment language and pension benefits see: https://www.thedivorceguy.com/michigan-divorce-update-who-is-your-beneficiary/
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By: Daniel Findling