California public employee pensions — CalPERS (California Public Employees' Retirement System) and CalSTRS (California State Teachers' Retirement System) — are among the most valuable assets in many California divorces involving state, local, or school district employees. Dividing CalPERS or CalSTRS requires a specialized court order called a Domestic Relations Order (DRO) that complies with the specific requirements of each retirement system. A CalPERS domestic relations order that does not meet CalPERS's detailed requirements will be rejected, and errors can cost the former spouse tens or hundreds of thousands of dollars in retirement benefits.
Is a CalPERS or CalSTRS Pension Community Property?
CalPERS divorce California and CalSTRS divorce California treatment follows California community property law. The portion of the pension benefit earned during the marriage — from the date of marriage to the date of separation — is community property subject to equal division. Benefits earned before marriage or after the date of separation are the employee's separate property. Determining the community share requires calculating the "time rule fraction": the numerator is the years of credited service during the marriage, and the denominator is the total years of credited service at the time of retirement.
Options for Dividing a Public Pension in California Divorce
Public pension divorce California division has two primary approaches: the "time rule" (or "present value" division) approach and the "segregation" approach. Under the time rule, the non-employee spouse receives a percentage of each monthly pension payment when the employee retires. Under the segregation approach for CalPERS, the community contributions are segregated into a separate account for the non-employee spouse, who has independent control over how those funds are managed and when they are distributed.
Divide CalPERS in divorce through the segregation method only when the employee has not yet retired — once the employee is retired and receiving benefits, only the time rule can be applied. The segregation method gives the former spouse more independence and protection against the employee's retirement timing choices, but also removes the former spouse from the employee's ongoing earnings credits.
The CalPERS Domestic Relations Order Process
A CalPERS domestic relations order must comply with CalPERS's specific requirements — CalPERS publishes a model DRO and requires pre-approval of the order before it is submitted to the court for signature. The CalPERS DRO review process can take several months. A government pension divorce California case involving CalPERS should include drafting the DRO early in the proceedings so it can be reviewed and approved before the divorce judgment is entered. A CalSTRS DRO follows a parallel process with CalSTRS's own requirements and model language.
Furubotten Law, APC handles CalPERS and CalSTRS DRO preparation and divorce proceedings involving public employee pensions throughout Orange County and Riverside County. Call (714) 795-3862 for a complimentary case evaluation.