What happens to my pension after a divorce?

November 7th, 2014 by Tiffany Hughes

A big concern for many is what happens to a pension that you may have when your divorce is finalized.

It is well established in Illinois that pension plans of various kinds, whether matured, vested or non-vested, contributory or noncontributory, may be treated as marital property. The classification and reimbursement principles in 750 ILCS 5/503(a) and 5/503(c) apply to pension and retirement plans. A pension that is established before the marriage, as well as its increases in value, remains nonmarital property; however, the marital estate may be entitled to reimbursement for marital contributions or for the significant personal efforts of a spouse that result in substantial appreciation. See In re Marriage of Di Angelo, 159 Ill.App.3d 293, 512 N.E.2d 783, 785 – 786, 111 Ill.Dec. 394 (2d Dist. 1987). In In re Marriage of Morris, 266 Ill.App.3d 277, 640 N.E.2d 344, 203 Ill.Dec. 685 (2d Dist. 1994), the court noted that an interest in a pension plan is marital property if a portion accrues during the marriage. The case was remanded to allow the parties to introduce evidence of value, which the parties failed to do at trial.

In In re Marriage of Smith, 2012 IL App (2d) 110522, 981 N.E.2d 1163, 367 Ill.Dec. 435, the appellate court found that the trial court failed to consider the factors in IMDMA §503(d). Instead, the trial court’s finding that any income in the wife’s 401(k) earned during the marriage should be divided, half to each side as a matter of course and without considering the statutory factors, was an abuse of discretion. The appellate court remanded the case, instructing the trial court to consider the statutory factors in order to divide the wife’s 401(k) in just proportions. Equitable division of retirement assets, as with all other assets of the parties, requires consideration of the factors in §503(d).

However, Pension benefits are a form of deferred compensation earned by an employee for his or her service to an employer; as such, they are treated as earnings, and to the extent that a spouse earned those benefits during the marriage, they are considered marital property and are subject to division upon dissolution, like any other marital property.