A large majority of states (as many as 47 by some counts) have a similar method for dividing pensions in divorce.

It goes by various names –  the coverture approach, the marital portion approach, the fixed percentage method, and the proportionate share method, to name a few.  For this discussion, I’ll use the term “coverture”.  In some states, this is the preferred method and in others, it is simply an acceptable method.  In states like Florida, Texas, and Tennessee, this does not apply.  There are also a handful of states that either has unclear or conflicting case law on this issue.

Today, I want to share with you some information that may help you explain this concept to your clients who likely have never encountered it before.  It is not uncommon for us to have conversations with attorneys or their clients where someone is arguing against the idea of coverture as being unfair or allowing the former spouse to share in something that accrued after the marriage.  Over the years we developed several ways of illustrating how the method works.  Sometimes we use analogies, for those who might “see” it that way.  Something like a smaller piece of a larger pie.  Below is sort of a  mathematical proof, for those who might “think” that way.

The traditional coverture method divides the retirement benefit that the participant receives upon commencement, often many years after the divorce.  While on the surface it may not seem fair for a former spouse to receive a portion of the final benefit, a close look at the coverture formula reveals that the method awards the former spouse a benefit based only on the years during which they were married to the participant and does not award to them any portion of a benefit based on non-marital service.

Remembering back to our days of middle school math and the concept of multiplying fractions using cancellation can help coverture make more sense.  For this example, we will assume that the plan benefit formula is 2% times Service at Retirement times Final Average Salary, but any service formula would work the same.  Here is the coverture fraction multiplied by the benefit formula:

Service While Married
————————————       X      2%     Service at Retirement     X     Final Average Salary
Service at Retirement  

When we cancel Service at Retirement from both sides, we are left with:

Service While Married  X  2%  X  Final Average Salary

This is the benefit that the participant would receive if only the marital years are used in determining the retirement benefit.  The traditional coverture fraction divides this benefit equally between the Participant and Alternate Payee.  The Participant would also receive an additional amount equal to:

Service while NOT Married X 2% X Final Average Salary

If you would like to discuss this concept in greater detail, we have experts available to help.  Feel free to call us at (844) 721-6500.