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Vested versus Non-Vested Pensions - How are they treated in a Rhode Island Divorce Case?


Attorney Pearsall, my wife and I are getting divorced in Rhode Island.  I have a pension that has been building up due to accrued time that I have put in over the years with my employer.  Ultimately, I don't know what it will amount to as far as monies are concerned when it finally vests or when I start taking pension distributions but it is something I feel strongly that I don't want touched.  How might the court treat my pension?



Thank you for your divorce question.  Pensions are certainly no stranger to the family court.  Generally speaking, the Rhode Island Family Court has the power to distribute only what is determined to be a marital asset of the parties.  

So a more direct question is, "what part of your pension is a marital asset."  If you started accruing time toward your pension before you got married, then that time and the monies that are attributable to it are not a marital asset, they are considered yours.  This is where the tricky part comes in.  Since your pension in particular is based on an accumulation of years which coincides to a certain amount of money once it is vested, then only the years you were married to your spouse are considered a marital asset that can be divided between you and your spouse.  However, if you have no actual monetary contributions to the pension and if you were to die today noone would get anything, then your pension's value is worthless as far as a value before the court.

If, on the other hand, you had contributed to your pension and you had contributions in the amount of say $32,000 but the pension hadn't vested and if you were to die today your beneficiary of the pension would merely get the contributions back, then that is the value of the pension $32,000.  Therefore, as long as all of the contributions were made during your marriage, then the $32,000 is a marital asset in your unvested pension that is subject to division between you and your spouse.

It can be a little tricky in Rhode Island divorces, especially when you are dealing with pensions, annuities, disability based incomes and retirement vehicles as to what is and what is not a marital asset divisible by the family court.

On the whole, whatever those marital years are, or whatever monies, if any, they may amount to before your pension vests are generally thought by many lawyers and judges to be divisible with 50% going to each party.  

Why is that the thought when Rhode Island is an equitable division (i.e. fairness based upon the circumstances) state for divorce purposes?  Well, the rationale often used is fairly logical.  It is simply that retirement vehicles such as pensions, 401K's, IRAs, etc.. were intended so that the parties would share those things equally when they retire.  Therefore, it makes sense to share the marital portion equally.

Typically, if a pension is vested then this becomes a rather complicated actuarial computation.  The computations is usually performed by the administrator of the pension at the time of distribution.  The administrator takes care of the distribution depending upon either what was settled upon by the parties to resolve their divorce, or what was ordered by the court, though usually the two are identical if the parties reached a resolution to their divorce by agreement.

In your particular case, you mention having a pension that has not yet vested. The question then must be asked whether it will vest before your divorce proceeding is done, if it will then you may have to do some bargaining with your spouse to make some trade-offs so your spouse doesn't take his or her rightful share of your pension.

If your pension has not vested, then it may have the value of it's contributions or it may be valueless.

As you can tell, this can be a complicated factor in divorces.  It is always best to consult a highly skilled legal professional to understands the ins and outs of your particular plan and the situations that may arise in the division of any plan.

I often explain to people that divorce doesn't have to be so difficult and confusing but make no mistake about it.  Divorce can be as complex as any other area of law with its finer points and details that can too easily be overlooked.

Take the time to get good legal advice.  It's worth it!

All my Best to All Who Go Before the Rhode Island Family Court,

I am Attorney Christopher A. Pearsall and I am "The Rhode Island Divorce Coach."