How Are Pensions Valued and Divided in an Illinois Divorce?

 Posted on October 02, 2020 in Property Division

If you are like most working adults, you probably plan to enjoy your retirement to the fullest. This can make retirement funds a serious concern during divorce. Retirement accounts are typically treated the same as other types of marital assets. The portion of the retirement funds that were accumulated during the marriage are a marital asset subject to division, while the portion of the retirement funds that were accumulated before the marriage are not subject to division. However, accurately valuing retirement funds is not always as straightforward as it may seem. Pension plans are often especially difficult to accurately quantify and divide during divorce because the value of the pension relies on the future payout of the plan.  

Methods of Valuing Pensions

Three of the most common valuations methods used to determine the present value of a pension for the purpose of asset division during divorce include:

• Life Expectancy Method: This approach is based on the pension holder’s life expectancy and the expected pension benefits he or she will receive.

• PBGC Actuarial and Mortality Tables Method: This method is based on information from the Pension Benefit Guaranty Corporation (PBGC).

• GATT Method: This valuation approach uses Group Annuity Mortality Tables and the interest rate for a 30-year U.S. Treasury Bond.

Dividing Pensions During Divorce

Once the present value of the pension has been determined, the spouses will need to make a decision about how to divide the pension. Many divorcing spouses decide not to divide the actual pension funds but instead to assign the pension to the pension holder and assign the other spouse other marital assets of equal value. The spouse who holds the pension essentially “buys out” the other spouse. The benefit to this approach is that the pension holder keeps his or her pension funds. However, if the value of the pension diminishes after the divorce, there is no way to recover the lost value. Spouses may also decide to divide the pension upon retirement. If you choose to split your pension upon your retirement, you will need to obtain a Qualified Domestic Relations Order (QDRO). This court order instructs the plan administrator to divide the pension benefits according to the settlement agreement or judgment.

Contact a Wheaton Divorce Lawyer

If you are planning to divorce, and you own complex assets such as retirement accounts, a DuPage County divorce attorney from the Stogsdill Law Firm, P.C. can help ensure your assets are accurately valued and equitably divided. Schedule a confidential consultation by calling our office today at 630-462-9500. 

Sources:

https://budgeting.thenest.com/calculate-value-pension-33081.html

https://srs.illinois.gov/SERS/Faq_QILDRO_sers.htm