Sharing pensions only fair
Even if a divorced spouse is entitled to a share of retirement funds, she or he should not be able to enjoy any savings accrued after the divorce.
But a divorcing spouse should be entitled to a fair share of the funds accumulated during the term of the marriage. Traditional assets like real estate account for less individual wealth today. Instead, people are more interested in putting money into the future - pension savings plans and stock options - making most of their employers’ package.
Neglecting to factor in the changing concepts of marital assets can generate inequality and unfair divorce settlements. The case before the Supreme Court involves a party whose severance payout will amount to nearly the value of the family home, or about 50 percent of their marital assets.
A lower court ruled in favor of including retirement plans as joint, and thus divisible, assets on a case-by-case basis. The difference between the lower court’s ruling and high court precedent lies in whether or not to include deferred compensation like retirement plans or pensions as martial property subject to division. In actuality, the essence of the debate is how to divide unspecified future compensation at the time of the divorce. It would be difficult to determine precise figures for severance and retirement compensation as they would depend on how long the beneficiary is employed. But outright exclusion of assets from equitable distribution because of a mathematical hassle is simply wrong.
The value of real estate, stocks, insurance and other financial instruments can change. Bonds can end up as trash if the underlying assets turn bad. It is unfair to cite a lack of certainty in value only for retirement plans. A retirement compensation packages is awarded for daily work during marriage and, therefore, should not be regarded in the same light as a lottery jackpot, whose value is set the moment it is won.
Severance entitlement in Korea is one month’s salary for each year of employment. Although the exact final payout cannot be decided until the expiration of the labor contract, the entitlement has been in effect for the period of employment. Therefore, termination pay should be seen as common property of the divorcing couple because the non-receiving spouse also contributed to building the asset in myriad ways during marriage.
Because a labor contract has not been terminated at the time of martial termination cannot be a reason to exempt its benefits from a divorce settlement.
Therefore, severance compensation should be counted among marital assets jointly accrued. Foreign cases have been expanding property settlement agreements to not only retirement and pension plans, but also to intangible assets such as professional licenses such as medicine and legal practice, business know-how and technology. Some lower family courts have ordered severance benefits to be included in joint marital assets that should be divided upon divorce. The highest court also must set a legal precedent in view of changing social trends and expectations.
Financial rewards from employment are only possible with a family’s support and cooperation. Severance, retirement and pension plans should be shared by husbands and wives.
Spouses are entitled to an equal share in potential martial assets.
Translation by the Korea JoongAng Daily staff.
*The writer is a lawyer.
By Yang Jung-suk