Non-Vested Pensions and Divorce Definition: A non-vested pension plan is one in which the employee has not completed the required years of creditable service in order to earn the right to receive benefits under the terms of the plan. Most pension plans require members to achieve a set number of years of creditable employment before being entitled to pension benefits under the terms of the plan (i.e. 3 years, 5 years, 10 years, etc.). Vesting occurs when the employee completes the number of years of service required to receive benefits under the plan at some point in the future.

General Discussion: Non-vested pensions, though not entirely earned, represent a form of deferred compensation for service performed over the course of a number of years. Although vesting occurs on one day, it is not logical to assume that the pension benefit for all years of employment up to that day was entirely earned on that one day. For example, an employee’s benefit may vest after completion of 5 years of service, however, the employee could not achieve vested status without being employed for the 4 years and 364 days prior. Therefore, part of the value of the vested pension after 5 years must have been attributable to the first 4 years and 364 days of employment.

Classification: There seems to be a general consensus that non-vested pension rights, to the extent that such rights accrued during the period of marriage, are considered marital property. A non-vested pension should not be considered entirely marital property, but such portion of the non-vested benefits which are attributable to service performed during the marriage should be included in the marital estate.

Valuation: Determining the value of the marital portion of a non-vested pension can be difficult. The following facts should be examined in determining value:

  • the time left before the benefits become vested
  • the length of the parties marriage
  • the contributions of both parties (primarily and secondary) to the pension
The difficulty of determining the exact value of the plan can be avoided by deferring payment of the other spouse’s share until the time pension benefits begin.

Distribution: Non-vested pension rights which accrue during the marriage constitute marital property and may be divided using either the immediate offset method or the deferred distribution method.

The most appropriate method of distributing a non-vested pension between divorcing parties is using the deferred distribution method. At the time the pension becomes payable the appropriate portion of the benefits are distributed to each party. Using the deferred distribution method eliminates any uncertainty about the vesting status and/or maturity of the benefits which would play a role in determining value for an immediate offset.

When using the immediate offset method of distribution it is necessary to establish a value for the non-vested benefits and award another asset in lieu of the non-vested benefits. However, inherent in this approach is the uncertainty of the vesting status of the benefits. If another asset is awarded to the spouse in lieu of the non-vested benefits, and the benefits never reach vested status, the employee is short changed. If the employee is willing to assume the risk that the benefits will never vest, it is possible to determine a value for immediate offset. Such value should reflect a calculation based upon the contingency of the benefit.

It should be noted that delaying distribution of pension benefits is not the same thing as delaying a decision about each spouse’s share of a retirement plan. Some courts have found that a possible solution to the problem of distributing non-vested benefits is to wait until such benefits vest to make a decision about how to divide the property. However, most courts have condemned this notion of postponing a decision about pension distribution.

State Case Law

The following is a summary of case laws we have come across in our research of this topic. If nothing is listed under a particular state it is because we have not found any pertinent cases relative to this topic. If you know of a case that relates to this topic, and do not find it listed here, please e-mail us the citation so that we can include it in this section.
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ALABAMA

Jackson, 656 So. 2d 875 (1995)
Non-vested benefits are considered marital property.

ALASKA

Laing v. Laing, 741 P.2d 649 (Alaska 1987)
Non-vested benefits are considered marital property.

ARIZONA

Koelsch, 713 P. 2d 1234 (1986)
Non-vested benefits are considered marital property.

ARKANSAS

Burns 847 S.W 2d 23 (1991)
Non-vested benefits are not considered marital property.

CALIFORNIA

In re Brown, 544 P. 2d 561 (1976)
Non-vested benefits are considered marital property.

COLORADO

In re Beckman, 800 P.2d 1376 (Colo. App. 1990)
Non-vested benefits are considered marital property.

CONNECTICUT

Thompson 438 A.2d 839 (1981)
Non-vested benefits are considered marital property.

DELAWARE

Robert C.S. v. Barbara J. S. 434 A.2d 383 (1981)
Non-vested benefits are considered marital property.

DISTRICT OF COLUMBIA

Barbour, 464 A.2D 915 (1983)
Non-vested benefits are considered marital property.

FLORIDA

Fla. Stat. Ann. 61.075 (3) (a) (4)
Non-vested benefits are considered marital property.

GEORGIA

Courtney, 344 S.E. 2d 421 (1986)
Non-vested benefits are considered marital property.

Stumpf v. Stumpf, 294 S.E.2d 488 (Ga. 1982)
Non-vested civilian pensions are divisible.

HAWAII

Linson, 618 P. 2d 748 (1980)
Non-vested benefits are considered marital property.

IDAHO

Shill, 765 P. 2d 140 (1988)
Non-vested benefits are considered marital property.

ILLINOIS

Robinson v. Robinson, 497 N.E.2d 140 (3 Dist. 1986)
It is clear that an interest in a pension plan, if a portion accrues during the marriage, is marital property regardless of whether the interest is matured, unmatured, vested, non-vested, contributory, or non-contributory so long as the employee spouse acquired the interest in the plan during the marriage.

In re Marriage of Hunt, 397 N.E. 2d 511 (1979)
Non-vested benefits are considered marital property.

In re Marriage of Wisniewski,437 N.E. 2d 1300 (1982)
Method of valuation.

In re Korper, 475 N.E.2d 1333 (Ill. App. Ct. 1985)
Under Illinois law a pension is marital property even if it is not vested.

INDIANA

Kirkman v. Kirkman, 555 N.E.2d 1293 (Ind. 1990)
Courts should consider the non-vested military retired benefits in adjudging a just and reasonable division of property.

Harris v. Harris, 690 N.E.2d 742 (Ind. App. 1998)
An non-vested property interest in spouse’s military pension plan at the time of final separation of the parties is not divisible as a marital asset, and military pension plan was properly excluded from the marital estate.

Skirvin v. Skirvin, 560 N.E.2d 1263 (Ind. App. 1990)
A policeman’s pension which 1) had not yet vested at the time the dissolution petition was filed, 2) would have been forfeited upon termination of employment, and 3) vested before the date of final hearing, constituted marital property subject to division.

Savage v. Savage, 374 N.E.2d 536 (1978)
While the rights of either spouse to payments under a pension plan must be considered by the trial court in determining the manner in which marital assets are to be distributed, an actual award under the property settlement must consist of assets in which the parties have a vested present interest which is sufficient to qualify the asset as marital property.

Moore v. Moore, 482 N.E.2d 1176 (Ind. App. 1985)
Although unvested benefits may be considered as a factor in determining the just and reasonable division of the assets, it was error for the trial court to distribute future employment benefits as part of the division of property.

Mullins v. Matlock, 638 N.E.2d 854 (Ind. App. 1994)
Only property with a vested interest at the time of dissolution may be divided as a marital asset. Any benefit that is not vested, but rather contingent and speculative in nature and in value, is not capable of division, and thus not marital property subject to distribution.

Ind. Code Ann. 31-1-11.5-2
Non-vested benefits are not considered marital property.

IOWA

In re Howell, 434 N.W.2d 629 (Iowa 1989)
Under the authority of Iowa appellate court decisions, military retirement pay and benefits are divisible in divorce actions. The member had already retired in this case, but the decision may be broad enough to encompass non-vested retired pay as well.

In re Bevers, 326 N.W. 2d 896 (1982)
Non-vested benefits are considered marital property.

KANSAS

In re Sedbrook, 827 P. 2d 1222 (1992)
In re Marriage of Harrison, 769 P. 2d 678 (1989)
Present value of vested or non-vested military retirement pay becomes marital property at commencement of action for divorce.

KENTUCKY

Poe v. Poe, 711 S.W.2d 849 (Ky. Ct. App. 1986)
Non-vested benefits are considered marital property.

LOUISIANA

Sims, 358 So. 2d 919 (1978)
Non-vested benefits are considered marital property.

MAINE

Wood v. Wood, 687 A.2d 636; 1996 Me.
An non-vested right to retirement benefits is a contractual right, subject to a contingency, and is an asset subject to equitable distribution in divorce proceedings.

MARYLAND

Deering, 437 A. 2d 89 (1981)
Non-vested benefits are considered marital property.

Ohm v. Ohm, 431 A.2d 1371 (Md. Ct. App. 1981)
Non-vested pensions are divisible.

MASSACHUSETTS

Feathler v Feathler (1992) 33 Mass App 924, 598 NE2d 671
By 1990 amendment ((St. 1990, ch. 467) ALM GL c 208 Sec. 34) expressly includes all vested and non-vested retirement benefits accrued during marriage as part of marital estate, and thereby expressly incorporated into statute, principles previously recognized in decisional law.

MICHIGAN

Hatcher, 343 N.W. 2d 498 (1983)
Non-vested benefits are not considered marital property.

Boyd v. Boyd, 323 N.W.2d 553 (Mich. Ct. App. 1982)
Only vested pensions are divisible.

MINNESOTA

Janssen, 331 N. W. 2d 752 (1983)
Non-vested benefits are considered marital property.

MISSISSIPPI

Hemsley, 639 So 2d 909 (1994)
Non-vested benefits should be considered in the division process.

MISSOURI

In re Marriage of Ward, 955 S.W.2d 17 (Mo. Ct. App. 1997)
Non-vested benefits are considered marital property.

MONTANA

In re Marriage of Laster, 197 Mont. 470, 643 P.2d 597, 603 (Mont. 1982)
Non-vested benefits are considered marital property.

In re Kis, 639 P. 2d 1151 (1982)
Non-vested benefits are considered marital property.

NEBRASKA

Neb. Rev. Stat. 42-366 (8) (1988)
Polly, 487 N.W. 2d 558 (1992)
KullBom, 306 N.W. 2d 844 (1981)
Non-vested benefits are considered marital property.

McBride v. McBride, 211 Neb. 459, 319 N.W.2d 72 (1982)
Trial court must include as part of the marital estate, for the purpose of division of property and/or the assessment of alimony, any pension plans, retirement plans, annuities, and other deferred compensation benefits owned by either party, vested or not vested.

NEVADA

Taylor v. Taylor, 775 P.2d 703 (Nev. 1989)
Non-vested benefits are considered marital property.

NEW HAMPSHIRE

Halliday, 593 A. 2d 233 (1991)
Non-vested benefits are considered marital property.

NEW JERSEY

Moore, 553 A. 2d 20 (1989)
Non-vested benefits are considered marital property.

NEW MEXICO

Meadows, 713 P. 2d 1017 (1986)
Non-vested benefits are considered marital property.

NEW YORK

Damiano, 94 A. D. 2d 132 (1983)
Cohen, 104 A.D. 2d 841 (1989)
Bums v. Bums, 84 N.Y.2d 369, 618 N.Y.S.2d 761 (1994)
Non-vested benefits are considered marital property.

NORTH CAROLINA

N.C. Gen. Stat. 50-20 (b) (2) (supp. 1992)
A pension which is not vested on the date of separation is classified as the separate property of the employee-spouse.

George, 444 S.E. 2d 449 (1994)
Non-vested benefits are not considered marital property.

NORTH DAKOTA

Delorey, 357 N.W. 2d 488 (1984)
Non-vested benefits are considered marital property.

OHIO

Ohio Rev. Code Ann. 3105.171 (a) (3) (A) (1)
Non-vested benefits are considered marital property.

Lemon, 537 N.E. 2d 246 (1988)
In determining whether an unvested pension is a marital asset, and in determining its value as an asset, the court should take into consideration the time left before the pension becomes vested, and the relevant criteria listed in RC Sec. 3105.17.1(F)

OKLAHOMA

Stokes v. Stokes, 738 P.2d 1346 (Okla. 1987)
Non-vested benefits are considered marital property.

OREGON

Richardson and Richardson, 307 Or. 370, 769 P.2d 179 (1989)
Non-vested benefits are considered marital property.

PENNSYLVANIA

Gordon v. Gordon, 436 Pa. Super. 126, 647 A.2d 530 (1994)
Whether vested or non-vested, retirement pensions acquired during the marriage are marital property subject to equitable distribution.

Braderman, 488 A. 2d 613 (1985)
Non-vested benefits are considered marital property.

RHODE ISLAND

Furia v. Furia, 638 A.2d 548 (R.I. 1998)
Non-vested benefits are considered marital property.

SOUTH CAROLINA

Kneece v. Kneece (S.C.App. 1988) 296 S.C. 28, 370 S.E.2d 288
A husband’s civil service retirement fund was property acquired during the marriage and, therefore, was part of the marital estate subject to equitable apportionment even though the retirement account was not vested and the husband could not begin receiving his retirement funds immediately.

Hall v. Hall, - S.C. -, 430 S-E.2d 533 (Ct. App. 1993)
Non-vested benefits are considered marital property.

Caughron v. Caughron, 418 N.W.2d 791 (S.D. 1988)
The present cash value of a non-vested retirement benefit is marital property.

SOUTH DAKOTA

Caughron v. Caughron, 418 N.W.2d 791 (S.D. 1988)
Non-vested benefits are considered marital property.

TENNESSEE

Cohen v. Cohen, 937 S.W.2d 823 (Tenn.1996)
Tenn. Code Ann. Sec. 2036-4-121 (Repl. Vol. 1991)
Towner v. Towner, 858 S.W.2d 888 (Tenn. 1993)
Non-vested benefits are considered marital property.

TEXAS

Cearley, 544 S.W. 2d 661 ( 1976)
Non-vested benefits are considered marital property.

UTAH

Greene v. Greene, 751 P.2d 827 (Utah Ct. App. 1988) Woodward, 656 P. 2d 431 (1982)
Non-vested benefits are considered marital property.

VERMONT

VIRGINIA

Va. Code Ann. 20-107.3 (A) (3)(G)(1)
The court may direct payment of a percentage of the marital share of any pension, profit-sharing or deferred compensation plan or retirement benefits, whether vested or nonvested, which constitutes marital property and whether payable in a lump sum or over a period of time.

Sawyer, 335 S.E. 2d 277 (1985)
Non-vested benefits are considered marital property.

WASHINGTON

In re Smith, 657 P.2d 1383 (Wash. 1983)
Non-vested benefits are considered marital property.

WEST VIRGINIA

Butcher, 357 S.E. 2d 277 (1985)
Non-vested benefits are considered marital property.

WISCONSIN

Bloomer, 267 N.W. 2d 235 (1978)
Leighton, 261 N.W. 2d 457 (1978)
Non-vested benefits are considered marital property. However, a discount factor must be applied to reflect that the benefits are not fully vested.

WYOMING

Broadhead, 737 P. 2d 731 (1987)
Non-vested benefits are considered marital property.

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