When you divorce, the fate of your CalPERS plan depends on the divorce settlement between you and your spouse.
California is a community property state. This means that all income and assets gained during marriage are to be shared 50% The provision also applies to CalPERS as well. Part of any discussions regarding a divorce settlement should include the value of the CalPERS account as well.
So let’s use an example. If a wife has worked 240 months at her CalPERS employer, and got married at the beginning of month 100, the husband is entitled to 50% of the 140 months of employment, or 70 months worth of CalPERS contributions out of her 240 total months. With the divorce attorneys or mediators, the divorcing couple would use this information to divide up the entire martial estate.
It would be advantageous for the employed spouse to buy out the entire CalPERS pension so that it retains its full value by keeping it on deposit with CalPERS. A divorce does not confer rights not available to the rest of the pension. For example, withdrawal from the pension results in forfeiture of the employer contribution, which helps pay for the monthly retiree benefits. This means if the pension is split 50/50, a withdrawal of the portion belonging to the non-working spouse would result in a decreased amount. Furthermore, if the balance is not rolled over to an IRA or 401k, there are tax penalties on top of that.
Agreeing on a value for the CalPERS account may not be easy. Keep in mind that the pension is funded by employee contributions which are shown on the annual member statement, as well as employer contributions which are not shown on the statement. If you withdraw from CalPERS, you will forfeit the employer portion.