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Pension Inequities Targeting Women

Private Retirement Plans

Inequity:  A wife will lose her right to a share of the money in her husband’s 401(k) plan if her husband leaves the job that sponsors the plan and cashes out the account or rolls it over into an IRA.  The wife’s consent is not required.  With 401(k) money increasingly becoming the largest asset of many marriages, this can result in a significant reduction of retirement income for women who work inside the home.

Note:  If the husband died while covered by the plan, the wife would have received the entire account balance, unless she waived her right to the funds in writing.  401(k) money is also a marital asset that would likely be divided at divorce.

Spousal consent is required to cash out benefits from defined benefit plans as well as defined contribution money purchase pension plans. 

Reform:  Currently no provision adopts the necessary reforms.  The law should require the non-employee spouse to consent to the cash out of 401(k) money.  If consent cannot be obtained, the plan must pay out the amounts in the account in a stream of payments over the joint lives of husband and wife.  If the plan terminates, the plan can buy an annuity or transfer the assets to the Pension Benefit Guaranty Corporation for payment.

Civil Service Retirement System

Inequity:  If the husband leaves federal employment with the right to a pension, but dies before applying for the pension, the widow will not receive any benefits.   This is a long-standing inequity under the Civil Service Retirement System that affects both widows and divorced widows of former federal employees. 

Reform:  Widows of federal employees receive survivor benefits, regardless of where their husband was working at the time of his death.  Divorced widows receive survivor benefits if they were awarded as part of the divorce proceedings. 

Note:  This provision brings the Civil Service Retirement System into conformity with the Federal Employees Retirement System and with the Employee Retirement Income Security Act for private sector widows and divorced wives.

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