How will a divorce affect your government pension when you used community funds to purchase prior service that was worked before the marriage?

If you work for the government and have a pension, in a divorce proceeding, your future ex-spouse is entitled to a portion of your pension for the length of the marriage.

However, many pension plans allow employees to purchase prior government service. For example, the Arizona Public Safety Personnel Retirement System, PSPRS, allows members to purchase up to five years of prior active military service.

What if you used community funds to purchase time that you worked before your marriage? Is your spouse entitled to add those years when computing how much of your retirement your spouse is entitled to?

Here’s an example to explain how Arizona law will calculate an ex-spouse’s claim to your pension benefit.

John, an unmarried man, was in the ARMY for four years. He then left the ARMY and joined the local police department and served as an officer for ten years. John met Susan and the two married a year later. John has contributed eleven years into the PSPRS retirement system prior to his marriage. This is John’s sole and separate property. John and Susan divorce fifteen years later. For every year John is married to Susan, Susan is entitled to half of John’s pension. This is community property. Here, Susan is entitled to 7.5 years of John’s pension; half of the fifteen years they were married.

However, during the marriage, John used community funds to purchase the four years he was in the ARMY. This adds an additional four years to John’s total years of service. Now that John and Susan are getting a divorce, Susan is calculating the years that John served in the ARMY because community funds were used to purchase the time. Susan wants to add two of the four years John was in the ARMY increasing her portion of John’s pension to 9.5 years.

John is claiming that he was unmarried when he was in the ARMY and Susan should not be allowed to add half of those years to her calculation.

Who’s right?

Recently, the Arizona Court of Appeals held that Susan is not allowed to use the four years John served in the ARMY, prior to the marriage, when calculating her share of John’s pension. However, John is required to reimburse Susan for her half of the community funds that John used to purchase the time.  See Stock v. Stock (Ariz. App. 2021). The difference could be substantial for both parties.  With two attorneys who personally have a combined thirty (30) years of Arizona Pension and Retirement benefits, KTO Law Firm understands Arizona government pensions.  We hope to help you.

By Jeremy Goad

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