Dividing pensions and retirement funds is among the most critical issues in many divorces. It’s also one of the most complicated. That’s why California has instituted two crucial rules to dictate how this division occurs: the time rule formula and the Brown Rule.
These rules help determine how such assets, accumulated during the marriage, are divided between the spouses upon divorce. Let’s explore what these rules accomplish and how they work in California divorces.
What Is California’s Time Rule Formula?
The time rule formula is used to calculate the division of retirement benefits earned by one spouse during the marriage. It divides the retirement benefits based on the proportion of time the marriage overlapped with the employment period. It calculates what portion of the benefits were earned during the marriage and are thus considered community property.
The time rule calculation takes the number of years the spouse was employed while married and divides it by the total years of employment that count toward retirement benefits. The resulting fraction is then applied to the retirement funds to determine the community’s share.
For example, if a spouse was employed for 30 years and married for 10 of those years, the community property portion of the benefits is 10/30, or 33.3%. That percentage of the retirement benefits should be divided equally between spouses, so the non-employee spouse would be eligible to receive 16.6% of the total benefits. Meanwhile, 66.6% of the funds remain the employed spouse’s separate property and are ineligible for asset division.
Understanding the Brown Rule
The formula is the result of the Brown Rule, which was named after the landmark case, In re Marriage of Brown (1976). This case established the precedent for treating pensions as community property in California.
The Brown Rule asserts that pension benefits, whether vested or not, are to be treated as jointly owned to the extent that they were earned during the marriage. Even if the pension funds are not yet receivable, they can still be divided as part of the divorce settlement.
Practical Considerations for Dividing Pensions in California Divorces
The application of these rules can be complex, often requiring actuarial expertise to calculate the division of retirement funds accurately. Couples can negotiate different arrangements, but such agreements must generally be fair and in line with California’s community property laws. In contentious cases, the court may need to intervene to determine the application of these rules and the fair division of assets.Regardless, divorcing couples must seek experienced legal counsel to address their retirement benefits properly. The application of the Time Rule Formula and the Brown Rule can be complex, especially when multiple retirement accounts are involved. A skilled attorney can help you understand your options under California’s community property laws and these retirement fund rules to ensure you achieve a fair and equitable settlement. Schedule your consultation with the professionals at the Viola Law Firm, P.C., to discuss your needs and learn more about how we can assist you today.