|
|||||
 Generate Pension Report Create Account Log In How It Works Online Demo Sample Report Download Pension Form Print Pension Form  QDRO Request Forms  FREE Download Book Basics of Pensions In Depth Analysis Special Issues Actuarial Standards Sample Authorizations Pension FAQs QDRO FAQs Glossary  Join Our Mailing List About Our Company About Our Analysts Contact Us Phone Consultations Our Fee Schedule Testimony  Your Privacy Security Terms of Use Customer Support  |
In order for the court to divide a future benefit plan upon divorce, it must first determine the extent to which it is considered property. Any benefit which does not meet the criteria to be considered property cannot be divided in cases of divorce. What is Property? In order for something to constitute property, it must be considered certainand meet the characteristics of transferability. The first attribute of property is that it is certain.A right to property exists unconditionally. Retirement benefits can be considered contractual rights. If an employee achieves a predetermined status or meets specific requirements, he or she has an undeniable right to receive benefits. This undeniable right can be termed a contractual right, and is not considered to be a mere expectancy. This undeniable right to benefits creates certainty. The second characteristic of property is transferability.Property can be given away on a temporary or permanent basis in return for consideration. Since property can be given to another person, it is considered transferable. Many state statutes contain anti-assignment provisions which do not permit an employee to transfer their benefits to another person. However, this inability to transfer benefits is not an inherent quality of retirement benefits, and therefore, should not preclude such benefits from being considered transferable. Pensions as Property The case against treating retirement benefits as property centers around the characteristics of property: certainty and transferability. As stated earlier an individual's rights to property are unconditional at the present time. Rights to property are not something that may exist or evolve at some point in the future. For example, a future inheritance does not provide any ownership rights at the present time, but purports an expectancy for ownership in the future. Since ownership rights do not exist at the present time, such would not be considered property. In addition, property is considered to be transferable, meaning it can be given to another in return for consideration. A professional degree or designation is not considered property due to the fact that it cannot be given to another in exchange for money or other property. Those who wish to dispute the notion that retirement benefits are considered property argue that similar to a potential inheritance or professional degree, retirement benefits are received in the future and cannot, under federal law, be transferred to another person. The case in favor of treating retirement benefits as property centers on the nature of retirement benefits, and the way these benefits are perceived by both the employers and employees in the workplace. Retirement benefits are considered contractual rights. This consideration is due to the fact that if the employee meets certain requirements he or she has an absolute right to benefits under the plan. The employee's right to these benefits can be considered part of the employment contract, thereby making it a contractual right not a mere expectancy. If the employee meets the requirements set forth by the plan, such employee will have an undeniable legal right to receive benefits in the future. Therefore, if the employee has already met all requirements necessary, the undeniable right to benefits is fully established at the present time. These qualities distinguish retirement benefits from a future possible inheritance, which only provides an expectancy of benefits rather than an absolute guaranty. Retirement benefits more similarly resemble the many forms of deferred compensation offered to employees during the course of their working lives. For example, an employee may be offered a bonus for good performance on the job for the past five years. These five years coincide with the period of marriage, but the bonus itself is not awarded until after the marriage has ended. The bonus would be considered marital property due to the fact that it is a direct result of the active efforts of the employee during the period of marriage. The very nature of the structure of retirement benefits provides the employee with a benefit at a point in the future due to efforts on the job in the past. Therefore, retirement benefits which are earned for years of employment which coincide with the period of marriage would be considered marital property. The theory is, had the employee not participated in the retirement program during those years of employment which coincide with the marriage, he or she would have brought a larger salary home to the family. Since a retirement benefit is a direct result of efforts put forth by the employee during the period of marriage, it is considered payment for those efforts. The fact that payment occurs at a point in the future does not change the reason for compensation. Since retirement benefits more closely resemble deferred compensation than professional degrees or a future inheritance, there is a very strong and valid argument that such benefits constitute property. Further, retirement benefits are clearly treated as property by both employees and employers in the workplace. Most retirement plans allow employees to take a reduction in salary in exchange for increased retirement benefits in the future. The majority of the time such an option is exercised by the employees, if available. In addition, employers often use enhanced retirement packages instead of additional salary as a lure to attract new employees or as a means to keep productive employees on staff. These examples of how retirement benefits can be substituted for current salary illustrates the argument in favor of treating them as property. If these benefits were contingent in nature, employers and employees alike would never substitute them for increases in salary. Not considering retirement benefits as property subject to distribution in divorce would cause serious problems in the divorce arena. As mentioned above, employees often choose to exchange current salary for future retirement benefits. Obviously, salary earned during the period of marriage is considered marital property. If the employee had the ability to take marital property, that being current salary, and exchange it for retirement benefits, assuming they were considered non-marital property, it would provide the employee with a method of dissipating the marital estate. This would result in a major disadvantage for the non-employee spouse. As long as employers provide retirement benefits in lieu of salary, the courts will have to view both sides of this exchange as property. Many of those who argue that retirement benefits should not be considered marital property use the "alimony argument." They believe that the inequities mentioned above are compensated for by the court when retirement benefits are considered for purposes of calculating and awarding alimony. To a certain extent, this argument is valid. However, alimony, by its very nature, is a contingent concept. Alimony ceases upon death or remarriage, and is usually subject to modification in order to accommodate a change in circumstance for either party. Therefore, there are a number of reasons a spouse's claim to alimony can be reduced after the divorce has been finalized. However, property division is almost always absolute and final upon completion of the divorce. Each spouse receives the property awarded to them regardless of a change in circumstance of either party. Therefore, if the court uses alimony as a vehicle for providing a property distribution, an absolute right to property is being attached to a contingent concept. A spouse would have to never remarry or rely on the continued life of the employee in order to be sure that he or she receives the full amount of the property awarded. Further, a change in circumstance of the employee could affect the property awarded to the spouse. A change in circumstance after the divorce would not normally affect division of other types of property, such as the marital home, vehicles, etc., and therefore, should not affect distribution of retirement benefits. In addition, some believe that using alimony as a method for division of retirement benefits could stir an element of reverse discrimination. Men are substantially less likely to receive alimony than women. Therefore, this could lead to problems ensuring that men receive a proper and fair division of property. The argument in favor of treating retirement plans as property is very strong. When examining the pieces of these arguments, the characteristics of certainty and transferability seem less important. Since employees often trade salary for retirement benefits, it would be hard to make the argument that retirement benefits are not sufficiently certain enough to be considered property. If retirement benefits were not certain, employees would never trade salary in exchange for them. The issue of transferability presents more of a problem. However, lack of transferability is not an inherent quality of retirement plans. Federal law prohibits people from transferring their retirement benefits in an attempt to eliminate the chance that they will jeopardize their future financial well being. This inability to transfer retirement benefits has nothing to do with the nature of the benefits, but hopes to eliminate people from ending up on public assistance due to poor decisions regarding their retirement. Therefore, since this federal law does not relate to the nature of the benefits, it should not create an obstacle for treating retirement benefits as property. 
Return to In Depth Analysis
|
||||
|
|||||
 | Our Pension Analysts Are Waiting... |
| ||
| Customer Support E-mail Form | Phone Toll-Free: 1-800-447-0084 | ||||
© Copyright 2001-2003, All Rights Reserved, Pension Appraisers, Inc.
Comments & Suggestions? or Recommend This Page to a Friend!
Created, Maintained & Hosted by
Divorcesource.com