In New Jersey, only assets acquired by either spouse “during the marriage” are subject to being divided in divorce.

It’s not uncommon, however, to start contributing to your retirement plan before you get married.  Retirement assets can include traditional pension plans, IRAs, Roth IRAs, Keough plans, deferred compensation plans, stock options ESOPs, annuities, 401(k), 403(b), and 457 plans.

Perhaps you’re now separated or considering divorce.  What happens to your premarital retirement plan? Does your spouse have a right to half?

Contributions during the marriage

The first thing to do is determine if you continued to make contributions to your retirement plan after you were married.

If not, your premarital retirement plan would generally not be subject to division with your spouse in divorce.

If, after you married, however, you continued to make contributions to the retirement plan, you would generally be entitled to keep only the portion earned prior to the marriage, as well as the earnings on that premarital portion.

The “marital value” is the value of your retirement asset accrued from the date of marriage through generally the date the Complaint for Divorce is filed with the court.

Determining Marital Value

The next thing to do is calculate the “marital value” of the retirement asset, which is the present value of the asset that your spouse would generally be entitled to share.

A key benefit of determining the present value of your pension is that it gives you the option to “offset” your pension’s present value with another marital asset of at least equal value.

For example, a Wife might wish to waive a $50,000 fifty percent share of the husband’s 401(k) in exchange for keeping the marital home with fifty percent equity worth $50,000.

Traditional pension plans

Traditional pensions, commonly referred to as “defined benefit” plans are plans where you accumulate credits for the amount of time you worked for your employer and you don’t know how much you will receive until you actually retire.

Defined benefit plans typically include military, police and fire, and teacher’s pensions.  Also, some employers offer a “cash balance” type of retirement plan, where a portion of benefits comprise a defined benefit portion.

Valuing and dividing defined benefit pension plans

If you have a defined benefit plan, you typically receive statements of accrued benefits from your employer once or twice each year.

Therefore, if your defined benefit pension plan commenced before the marriage, you or your attorney would typically provide your most recent accrued benefit statement to the outside actuary or forensic accountant.

The actuary or forensic accountant would typically calculate the marital value with the premarital component omitted.  The approximate marital value could then be used by you and your attorney to negotiate with your spouse and his or her attorney as to the value in which your spouse might share.

Defined Contribution Plans 

If you have a “defined contribution” plan, your employer periodically contributes funds to your account.  Defined contribution plans include 401(k) plans, 403(b)plans, employee stock ownership plans, and profit-sharing plans.

The value of defined benefit accounts is reflected on periodic statements and fluctuates with performance of account investments.

Valuing and dividing Defined Contribution Plans

If you have a defined contribution plan, you typically receive periodic statements, much like bank statements.

Therefore, to segregate the premarital value from the marital value in which your spouse could be entitled to share, you should start by obtaining statements dated closest to the date of marriage, to the extent possible.

The most accurate way to ensure you retain the premarital value and earnings on the premarital value is to engage a forensic accountant, either jointly with your spouse or on your sole behalf.

Retaining a forensic accountant jointly with your spouse could save money and time by eliminating your spouse hiring his or her own accountant to refute the result of yours.

In any event, the forensic accountant would advise you which documents he or she needs to quantify your premarital interest and any gains on that interest and calculate the marital value in which your spouse might be entitled to share.

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