What happens to your CalPERS pension after a divorce? It’s complicated.
Ralph Johnson got married a year and a half before he retired from the Alameda County Fire Department.
Twelve years later, in 2011, he filed for divorce. In the proceedings that followed, his ex-wife was found to be entitled to less than 1 percent of his CalPERS pension.
He was surprised to learn that her small share of the pension had a much bigger implication: He couldn’t remove her as the plan’s beneficiary. If he dies before she does, she will start receiving a large portion of the pension, said Johnson, 72, of Lincoln.
“I just went, ‘wow,’” he said.
The California Public Employees’ Retirement Law in most cases prevents people with public pensions from changing their beneficiary if they divorce after retirement, even if an ex-spouse is entitled to only a tiny fraction.
As the rate of “gray divorce” rises among people over 55, more retirees with public pensions likely are trying to figure out what happens to their pensions upon divorce.
It’s complicated.
CalPERS recently posted an overview document outlining how a pension is divided upon divorce, and has an entire 45-page guide to changing a beneficiary after retirement.
Had Johnson and his ex-wife divorced before his retirement, Johnson could have named another beneficiary for his share of his pension at the time he retired. His ex-wife could have named a beneficiary for her share.
How long a couple is married while a public employee is accruing service credit is the main factor in how much of their retirement the spouse is entitled to upon divorce. Since Johnson was only married for about a year and half before retiring, his wife was entitled to only a small slice of his pension.
If he had retained 100 percent of his pension in the divorce proceedings, he would have had more options.
While the law’s finality in situations like Johnson’s may seem unfair, the alternative would create a whole different set of complications, said family attorney Hal Bartholomew, of Sacramento firm Bartholomew and Wasznicky.
Retirees have several options for collecting their pensions. Generally, they receive the biggest monthly payment if they don’t designate anyone as a beneficiary. When they die, the monthly payments stop.
When they select a spouse or someone else as a beneficiary, their own monthly payments are reduced. Actuaries determine the amounts under each option based on predictions of how long the parties involved might live, such as age and sex (women typically live longer than men).
If CalPERS members were able to change their beneficiaries after retiring, those calculations for the previous beneficiaries would go out the window. An old woman could marry a young man, for example, and upon her death the young man could inherit decades’ worth of pension payments.
“I think it would be negative for PERS’ financial position to have that happen,” Bartholomew said.
Johnson said he wrote a letter to CalPERS asking to change his beneficiary toward the end of the divorce process. The retirement fund told him he could only change it with a court order. When he asked a judge to make a change, the judge told him too much time had passed from Johnson initiating the divorce to his seeking the beneficiary change, he said.
Johnson brought the issue to state Senator Jim Nielsen, R-Tehama.
“I agree with you that this is a matter that merits further research,” Nielsen said in a response letter in 2014.
Johnson plans to take up the issue again with lawmakers.
“I’m not going to give up, I’m not going to go away, because it’s not right,” he said. “I want to make sure it doesn’t happen to somebody else.”