06 Feb How is a pension calculated when there’s a divorce?

Q. I have a question regarding New Jersey police pension funds. If a party is divorced and the ex-wife is entitled a portion of the pension for the years married, does the pension amount seize at the earnings accrued during the marriage only? Meaning if the salary at the time of divorce was $200,000 per year, is the ex-wife only entitled to a portion of the $200,000, or do they get a portion of the ending salary at the time of the official retirement, which at that point will obviously be a lot higher?
— Uncertain

A. It comes down to the specifics of your agreement when your marriage ended and the law.

Kenneth White, a certified matrimonial attorney with Shane and White in Edison, said generally, the terms of a divorce addressing equitable distribution of retirement benefits, particularly of pension benefits, whether entered into by consent or at the specific direction of a judge at the conclusion of a trial, will effectively read as follows:

“It is understood and agreed to between the parties that the said Pension Plan is subject to equitable distribution. Further, it is understood and agreed to between the parties that the said Pension benefits are to be divided so that the ex-spouse shall receive 50% of the benefits amassed within said Pension Plan during the marital coverture period which is between the date of the parties’ marriage, [ Fill In Date] and the date the parties’ Complaint for Divorce was filed, [Fill in Date].”

“In reality what this language indicates is that your ex is sharing in so much of the time served by you into your amassing pension benefits,” he said.

White offered this example: If in order to qualify for pension benefits you were required to put in 30 years of service; you retired from your position on the anniversary of you having served 30 years; and you were married during that full 30 years period, your marital coverture period would be equal to 100% of the pension benefits amassed and therefore your ex 50% of the total pension benefits paid out when the pension went into pay status (one half of what was amassed during your marriage).

Alternatively, in a scenario within which you were required to put in 30 years of service; you retired from your position on the anniversary of having served 30 years; and you were married during only 10 of those years of service, your marital coverture period would be equal to 33.33% of the pension benefits amassed (10 divided by 30) and therefore your ex would receive a sum equal to approximately 16.66% (33.33% divided by 2) of the pension benefits paid out (one half of the benefits amassed during the marriage), he said.

“The plan administrator tasks with dividing up how your pension payments are divided between your ex and yourself only has available to him/her knowledge of the total amount due and owing on your behalf for your total years of service earned into the pension system as of your date of retirement as well as direction per the terms of your Qualified Domestic Relations Order directing the plan administrator what percentage of the benefits are to be released directly to you as opposed to what percentage of the benefits are to be released to your ex,” White said.

“Effectively, it is a rather simplistic formula, i.e., what percentage of the time you were amassing benefits in the pension system against how much of that time you were married and your ex is only sharing in so much of the time amassed into the pension system during which the two of you had been married, as opposed to someone trying to calculate what your theoretical monthly pension benefit payout would have been at the time you were divorced and creating some type of formula to limit your ex’s share of the payout benefits back to that date,” he said.

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This story was originally published in February 2025.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.