How are pension divided for divorce?
The "Immediate Offset" Approach
Under this method, the present value of the pension benefits are calculated and a determination is made as to that portion of the present value that was earned during the marriage. The court awards the pension to the employee spouse, and the non-employee spouse receives other marital property of offsetting value.
(1) It results in a final settlement of the distribution of the retirement benefits.
(2) Continuing court enforcement and supervision is not required.
(3) The parties to the divorce are free from future entanglements.
(4) The non-employee spouse does not have to establish and maintain contact with the pension plan administrator.
(5) The non-employee spouse does not have to worry about and/or guard against the possibility of the employee spouse changing pension plan beneficiaries.
(6) The non-employee spouse does share, to some extent, the risk of the employee spouse not receiving benefits, because the present value of the pension benefit does reflect actuarial discounts for contingencies that might prevent realization.
(1) The employee spouse bears the brunt of the risk of not receiving the pension benefit.
(2) Offsetting pension benefits with liquid assets affords the non-employee spouse an opportunity for greater immediate economic gain.