By Lili Vasileff
wealthprotectionmanagement.com
December 4, 2025
A cash balance pension plan is a type of defined benefit retirement plan in which an employer credits each participant’s account with a set percentage of their yearly compensation plus interest. Unlike traditional pensions, benefits are expressed as a hypothetical account balance, making them resemble defined contribution plans, though they remain employer-funded and actuarially managed.
Challenge in Divorce Discovery
- These plans can be difficult to identify and value during divorce proceedings because they often look like 401(k)-style accounts but are legally pensions.
- Employers may not provide clear statements of accrued benefits, projected growth, or vesting schedules. One spouse may underestimate the plan’s value, leading to inequitable distribution. An independent actuarial valuation may be needed.
- Discovery requires specialized financial and legal expertise to ensure the marital portion of the plan is properly disclosed and divided.
Post-Divorce Implementation Impact
- If a business owner implements a cash balance plan after divorce, contributions are typically mandatory and substantial, reducing the owner’s disposable income.
- Because contributions are tax-deferred and locked into the plan, funds that could otherwise be used for alimony or support payments are diverted.
- This creates a cash flow strain: while the owner gains long-term retirement benefits, the recipient spouse faces increased risk of nonpayment or reduced support.
- Courts may view such post-divorce implementation as a shielding tactic, complicating enforcement of alimony obligations and requiring careful legal scrutiny.
- If the payor spouse petitions for alimony modification citing reduced disposable income due to contributions to a cash balance plan, discovery is essential for opposition to modification. The payor can build a strong defense against modification by showing the court that the pension plan is a voluntary post‑divorce financial maneuver, not a legitimate reduction in ability to pay alimony.
