Protecting Pensions & 457's / Uncategorized

457 and Divorce

457 and Divorce

457 Deferred Compensation plans are the government’s version of the private sector’s 401(k). A 457 deferred compensation plan is a defined contribution plan for government employees. When it comes to 457 and divorce, the amount of the 457 account subject to distribution in the divorce must be determined.

Since the 457 plan is considered a deferred compensation plan, New York courts follow the same rules with 457 and divorce as they would any other type of deferred compensation plan. The controlling authority on a divorcing spouse’s entitlement to deferred compensation plans is the case of Majauskas v. Majauskas, 61 NY 2d 481 – NY: Court of Appeals 1984. The Majauskas Court dealt with the issue of splitting a pension in a divorce, but the ruling reached by the Court is applied to all deferred compensation plans generally.

To break down the calculation prescribed by Majauskas as applied to 457 and divorce, one must begin by determining the full value of the 457 account. The full value of the account will not necessarily be subject to distribution, but needs to be determined in order to find the amount that is.

In resolving 457 and divorce issues, the full value of the account is the balance of the 457 at the time of valuation. From this amount, it must then be determined what amount is subject to distribution. When it comes to 457 and divorce, only the “marital portion” of the account is subject to distribution. The “marital portion” of the 457 is the amount of money accrued in the account after the date of the marriage and up until the divorce. This marital portion of the 457 account is then distributed amongst the spouses. Any amount accumulated prior to the marriage is separate property not subject to distribution in the divorce. For this reason, in resolving the distribution of a 457 and divorce, the account balances at the time of the marriage and the time of filing for divorce are very important pieces of information to have.

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