{2 minutes to read} One new wrinkle has come up regarding how to divide deferred compensation plans as part of a divorce. Until last year, New York deferred compensation plans (both state and city) would allow parties to agree on a specific dollar figure as of a specific date. The plan would then calculate gains or losses in the investments after that date until the date that they actually created a separate account for the alternate payee. Unfortunately, both plans will no longer calculate gains or losses. This creates a problem for using the usual method of picking a number and then attributing gains or losses moving forward.
The easiest way around the problem would be to agree on a percentage that the alternate payee will receive as his or her share from the deferred compensation plan. This is doable if all of the plan is marital property. One party will get 50% or some other agreed-upon percentage.
It’s a little more difficult though when part of the money in the plan was contributed before the marriage, or if contributions continue or any money is contributed after the agreed-upon date of the split. It is possible with a little bit of extra work to take those numbers and create a percentage out of them. For example, the alternate payee will receive 39.9% instead of exactly 50%. It might be a little more complicated but that math is doable.
Finally, what happens if the participant is still contributing — usually through payroll deduction — after the agreed-upon date? This kind of situation is a real head-scratcher and there is no absolutely perfect way to handle this. The best way is to try to estimate a percentage that both parties can live with.
Please feel free to call me to talk about this kind of problem if you run into it.
Steven L. Abel, Esq.
101 South Broadway
Nyack, NY 10960
(P) 845-638-4666
(E) [email protected]
