Valuing Pensions in Divorce Cases

In California and other states, the idea is to reckon the economic value of the pension at the time of divorce. In theory this is done so that the individuals post-divorce work efforts are not incorrectly awarded to the marital period.

There appear to be several ways to handle the valuation of a pension in an divorce case. The ease at which it can be done really depend on if it is a defined benefit or defined contribution plan. Overall here are the approachs:

1. One approach is to value the defined benefit plan at the date of divorce. In otherwords, just look at what is in the pension at the time of the divorce.

2. Another is to value it at the projected retirement and then to do a time rule analysis, apportioning the pension by the fraction of marital years to total years.

3. A third approach is called here a a QUILDRO qualified Illinois domestic relations order. This approach assigns the pension in proportions in the future. The proportions are based on when the retirement would be paid out.

4. A fourth approach simply values the contributions and their interest as they have been paid in - more appropriate for defined contribution plans. This is somewhat problematic for defined benefit programs.