Keith Mack
Alabama is an equitable distribution state, meaning that in a divorce, courts will divide property in a fair and equitable manner. This includes pensions and retirement accounts, which are considered marital property and subject to equitable distribution laws. However, Alabama no longer recognizes common-law marriages that began after January 1, 2017, and the requirements for establishing a common-law marriage vary by state. Common-law marriages that began before 2017 will still be recognized, and while they are legally binding, they can only be ended by divorce or the death of a spouse. This raises questions about the pension benefits of common-law spouses, which are not always clear to employers.
| Characteristics | Values |
|---|---|
| Common law marriage recognized? | Yes, but only if it began before January 1, 2017. |
| Requirements for common law marriage | Both spouses must be adults, of sound mind, and not married to someone else. They must live together, intend to be married, and be capable of entering into a marriage. |
| Common law spouse entitled to pension? | Not explicitly stated, but likely yes. Common law marriages are just as legally binding as ceremonial marriages, and pensions are considered marital property. |
| Public pension systems | Yes, Alabama has 21 public pension systems, including state-level and local-level programs. |
| Pension benefits | Protected under state law and affirmed by court rulings. However, Alabama law allows for changes to be made to retirement benefits. |
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What You'll Learn
Common-law marriage requirements in Alabama
Alabama no longer recognizes common-law marriages that began after January 1, 2017. However, common-law marriages that started before this date are still valid and are treated as regular marriages.
For a common-law marriage to be legally recognized in Alabama, the following requirements must be met:
- Both parties must be adults (over the age of 18).
- Both parties must be of sound mind.
- Neither party can be currently married to someone else. It is important to note that even if one starts living with someone without the capacity to marry, a common-law marriage can still occur if the person gets a divorce or if their spouse dies while living together.
- Both parties must have the legal right or "capacity to marry".
- Each person must intend to be married to the other.
If a common-law marriage is legally recognized, it can only be ended by divorce or the death of one of the spouses. In the case of divorce, Alabama is an equitable distribution state, meaning courts will divide property and debts in a fair and equitable manner, which may not necessarily be a 50/50 split. Pensions and retirement accounts are considered marital property and are subject to equitable distribution laws for amounts accumulated during the marriage.
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Pension distribution in Alabama divorces
Alabama is an equitable distribution state, meaning that in a divorce, courts will divide property in a fair and equitable manner. This includes pensions and retirement accounts, which are considered marital property and subject to equitable distribution laws. However, this only applies to the amounts accumulated during the marriage. Any amounts accumulated before the marriage or after separation are considered separate property.
To legally split pensions and other retirement funds, an attorney or specialized firm must create a qualified domestic relations order (QDRO). Determining the exact value of pensions and retirement accounts can be complex, and often an expert such as an accountant, business appraiser, pension valuator, actuary, or certified divorce financial analyst is required to make an accurate assessment.
Alabama's pension laws allow for changes to be made to certain aspects of retirement benefits. For example, the state has allowed changes to workers' retirement ages with a two-thirds vote of the legislature. However, it is unclear if Alabama pension laws allow for changes to vesting periods or benefit calculations for active employees who have met the years-of-service requirement.
It is important to note that Alabama no longer recognizes common-law marriages that began after January 1, 2017. Common-law marriages that began before this date are still recognized. Common-law marriage does not require a marriage license or an exchange of vows, but instead resides in the "common law", predominantly in judicial precedent involving spousal rights or divorce. While common-law marriage typically isn't based on a state statute, the requirements for establishing it vary by state.
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Alabama's public pension systems
The state's retirement system agency manages the investments for all plans collectively. Alabama's retirement plans qualify as 401(a) plans, and employees contribute a set percentage of each paycheck to their accounts. These contributions are made on a tax-deferred basis, and employees can expect to receive a set monthly benefit upon retirement. The specific benefit amount will depend on the type of plan and the individual's work history.
It is worth noting that Alabama does not levy income tax on pensions. In the context of divorce, pensions and retirement accounts in Alabama are considered marital property and are subject to equitable distribution laws. This means that pensions accumulated during the marriage are divided fairly and equitably, although not necessarily equally. Any amounts accumulated before the marriage or after separation are considered separate property.
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Alabama's pension contribution requirements
Public Pensions
Alabama's public pensions are a state mechanism that provides retirement benefits to state and local government employees. In the fiscal year 2020, Alabama's state and local pension systems made payments totalling $3.7 billion, with contributions of $2.3 billion. Of this, $818.2 million came from employees, and the remainder from state and local governments. Alabama teachers, public safety officers, and public workers' pension benefits are protected under state law. However, Alabama pension laws do allow for changes to be made to public pension benefits by future state laws, although only to certain parts of those benefits.
Employee Contributions
Alabama has increased employee pension contributions over time. For employees who started on or after January 1, 2013, excluding state police, firefighters, and law enforcement, contributions increased from 6% to 6.2%. For firefighters and law enforcement employees, excluding ERS state police, contributions increased from 7% to 7.2%.
Common-Law Marriage
Alabama recognises common-law marriages that began in 2016 or earlier, although it will no longer recognise those formed after January 1, 2017. Common-law marriages are created by the acts of the spouses, without a marriage license or exchange of vows. While common-law marriage can create uncertainty for employers regarding employee benefits, they are lawful marriages under state and federal law. ERISA provides a plan participant's spouse with rights related to retirement benefits, including annuities and pre-retirement survivor annuities.
Divorce and Marital Property
In Alabama, pensions and retirement accounts are considered marital property and are subject to equitable distribution laws. This means that in a divorce, courts will divide property in a fair and equitable manner, but not necessarily a 50-50 split. Any amounts in pension and retirement accounts accumulated before marriage or after separation are considered separate property.
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Alabama's pension protections and allowances for change
Alabama's pension laws allow for changes to be made to certain aspects of public pension benefits. While teachers', public safety officers', and public workers' pension benefits are entitled to certain protections under state law and court rulings, the state does retain the right to change some parts of retirement benefits. For example, changes to workers' retirement ages can be made with a two-thirds vote of the legislature.
In Alabama, pensions and retirement accounts are considered marital property and are subject to equitable distribution laws in the event of a divorce. This means that the amounts accumulated during a marriage are split between the two spouses, while any amounts accumulated before the marriage or after separation are considered separate property. However, gifts or inheritances are considered separate property and are not subject to equitable distribution.
Alabama is one of eight states that continue to allow common-law marriages, which are just as legally binding as ceremonial marriages. However, Alabama no longer recognizes common-law marriages that began after January 1, 2017. Common-law marriages can create uncertainty regarding employee benefits, as employers need to be clear on the rights and responsibilities of common-law spouses. In the past, the lack of a clear definition of "spouse" has led to confusion over whether retirement plans needed to determine a participant's spouse according to state law or could apply a more limited definition.
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Frequently asked questions
A common-law spouse is a person who is legally married by common law. In Alabama, there are three requirements for a common-law marriage: both parties must be adults, both must be of sound mind, and neither must be married to someone else. Common-law marriages that began in 2016 or earlier are recognized in Alabama, but those that began after January 1, 2017, are not.
Yes, pensions and retirement accounts are considered marital property in Alabama and are subject to equitable distribution laws. This applies only to the amounts accumulated during the marriage. Any amounts accumulated before the marriage or after separation are considered separate property.
In Alabama, courts will divide property in a fair and equitable manner, but this does not necessarily mean a 50-50 split. Courts will use a number of factors to determine what is fair and equitable, such as the length of the marriage, the economic contributions of each spouse, and tax consequences.
Public pensions in Alabama are retirement benefits provided by the state and local governments to their employees. There were 21 public pension systems in Alabama as of 2020, with a total of 478,186 members.
