City of San Diego

SDCERS & Divorce: DROs for the San Diego City Employees’ Retirement System

SDCERS OVERVIEW

Employees of the City of San Diego, San Diego Unified Port District, and San Diego County Regional Airport Authority participate in SDCERS, and are “members” of the retirement system.  SDCERS is a defined benefit plan which provides for a monthly benefit upon retirement.  If employment is terminated, a member may withdraw his/her contributions; however, funds contributed by the employer cannot be withdrawn by the member.  If a member contributes to SDCERS while married, then his/her spouse will have a community property interest in the retirement benefits.

FIRST STEPS: GETTING MEMBER INFORMATION & SENDING NOTICE OF ADVERSE INTEREST 

All contents of a SDCERS member’s file are confidential.  However, the member, former spouse, and their attorneys can obtain information about the member’s benefits in order to determine the community property interests in a member’s account.  SDCERS will provide the member’s service credit and accumulated contributions, date of membership, refundable value, and statements of account as of the date of marriage and the date of separation.  If the member is already retired, the options selected at retirement, the named beneficiary, and the amount of the monthly allowance and any death benefit payable will be provided.  The member or his/her attorney can simply send a written request for this information to SDCERS.  The non-member spouse or his/her attorney will need to submit either (i) an authorization to release account information that is signed and dated by the member, or (ii) a subpoena for business records.

One of the first steps when dividing SDCERS benefits is to ensure that the retirement plan is aware of the pending divorce.  This can be accomplished by sending SDCERS a written “Notice of Adverse Interest.”  This will place a hold on the member’s account; but SDCERS will not pay the former spouse any share of benefits until SDCERS is joined (see below) and receives a Domestic Relations Order (DRO) instructing the Plan to pay benefits to the former spouse.  If the member is already retired, a Notice of Adverse Interest will ensure that SDCERS withholds the former spouse’s estimated share until the Plan receives the Joinder and DRO.  Further, SDCERS will withhold a portion of any return of contributions to the member.

SDCERS JOINDER REQUIREMENT

Like many other public employer plans, SDCERS must be joined to the marital dissolution proceedings before a DRO can be implemented.  “Joinder” is the legal process that names a third-party claimant to a court case; in this case, to legal separation or divorce proceedings.  Your family law attorney may have already prepared and filed a joinder for SDCERS.  However, if you need a Joinder for your SDCERS benefits, QDRO Helper can assist you with the joinder for an additional $200 flat fee.

SDCERS DOMESTIC RELATIONS ORDERS (DROs) & THE TIME RULE FORMULA / BROWN FORMULA

SDCERS requires both a Joinder and a DRO before benefits can be paid to a non-member spouse due to dissolution of marriage.  The DRO is a court order that will instruct the plan how the retirement benefits should be divided.  The most common method of dividing a community property interest in SDCERS is by using a formula knows as the “Time Rule Formula” or “Brown Formula”.  Using this formula, the former spouse’s share of benefits is determined taking 50% of a fraction where the numerator is the service credit earned by the member during the marriage and the denominator is the member’s total years of service credit.

TIMING & GILLMORE ELECTION

SDCERS will only start paying benefits to a former spouse once the member retires and commences receiving monthly retirement benefit payments.  However, under California law, the former spouse may demand his/her share once the member is eligible to retire, by making what is known as a “Gillmore election”- named after the court case Marriage of Gillmore, 29 Cal.3d 418 (1981).  The member will be responsible for paying the former spouse directly until the member retires; then SDCERS will begin making payments directly to the former spouse.

DROP ACCOUNT

Some SDCERS members participate in the Deferred Retirement Option Program (“DROP”).  Usually, when a member enters DROP, he/she also agrees to retire within 5 years.  DROP allows a member to keep the retirement benefit earned as of the date of entry into DROP while also earning additional benefits which can be paid in a lump sum or as additional retirement income.

When calculating the member’s benefits, the Plan treats the member as if he/she had retired on the DROP entry date and credits the member’s monthly pension to his/her DROP account.  Additional member and employer contributions, as well as COLA increases and any annual supplements are added to the DROP account.  DROP should be addressed in all DROs for both active members and members who are already part of DROP.  The parties should also be aware that SDCERS cannot pay the former spouse any DROP account benefits until the member actually retires and exits DROP.

DISABILITY BENEFITS

Disability benefits should also be addressed in the parties’ DRO.  Once common way to address this issue is to state that if a member receives a disability retirement before being eligible for service retirement, then the former spouse will only be able to receive his/her community interest share once the member reaches the required service retirement age.  However, it is possible to state that the former spouse will receive a community property share of any disability retirement benefits.   

SURVIVOR BENEFITS

Survivor benefits should also be discussed and negotiated by the parties prior to having a DRO drafted.  Members can designate beneficiaries to receive survivor continuance benefits; however, a member can only name one beneficiary for a survivor benefit.  Once a beneficiary is designated, the designation cannot be changed.  If a divorce takes place after retirement (or entry into DROP), the retirement option or beneficiary named at time of retirement cannot be changed.

At retirement, a member may select either the “maximum benefit” or one of four separate settlement options (aptly named Optional Settlement 1, 2, 3 and 4).  Detailed information about the various options can be obtained from SDCERS.  If the parties legally separate or divorce prior to the member’s retirement or entry into DROP the member can still provide a survivor benefit to the former spouse by elections one of the settlement options.  If the member does not elect to provide for survivor benefits when an option is selected, then SDCERS will stop payments to the former spouse upon the member’s death.

DEATH OF FORMER SPOUSE

Once the DRO is in place, the former spouse can name a beneficiary to receive his/her share of the benefits.  The former spouse’s share of benefits can instead revert to the member if the DRO specifically states that is the parties’ intent.  This is another issue that should be part of the divorce or legal separation negotiations.

SDCERS DEATH BENEFITS

SDCERS provides various death benefits, including benefits for death when the member was eligible to retire, industrial death benefits, active member death benefits, DROP death benefits, and death benefits after retirement.  Information about these death benefits can be obtained from SDCERS; however, it is important to note that even if the member has named a beneficiary other than the former spouse, the former spouse may have a community property interest in the death benefits.  The DRO should clearly state whether the former spouse will be entitled to any death benefits, and if so, then to what extent.  Often, parties will provide death benefits to the former spouse up to a pro-rate share based on the same “time rule” or “Brown formula” discussed above.

ADDITIONAL QUESTIONS ABOUT SDCERS & DIVORCE?

If you have additional questions or if you would like to get started on a DRO for your SDCERS benefits, please call 619-786-7376 to speak with an attorney at QDRO Helper.  You can also get started by visiting our forms page, or by emailing info@qdrohelper.com.

DISCLAIMER: Any legal information on this blog has been prepared by QDRO Helper for informational purposes only and should not be construed as legal advice. The material posted on this website is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Note that sending an e-mail to QDRO Helper does not create an attorney-client relationship, and none will be formed unless there is an express agreement between the firm and the individual.

DROs for City of San Diego 401k, Deferred Compensation, & Supplemental Pension Savings Plans

City of San Diego Retirement Plans

In addition to SDCERS, employees of the City of San Diego may participate in the following retirement plans:

  • City of San Diego 401(k)
  • City of San Diego Supplemental Pension Savings Plan (also known as the “SPSP”)
  • City of San Diego Supplemental Pension Savings Plan Hourly (“SPSP-H”)
  • City of San Diego Deferred Compensation Plan

Domestic Relations Orders (DROs) are specific court orders that are required in order to divide any of the above City of San Diego retirement plans due to divorce.  Below we will outline some basic information about City of San Diego DROs.

Joinder Requirement

All City of San Diego retirement plans require a joinder be filed and served on the plan before benefits can be distributed pursuant to a QDRO.  Joinder is a legal process that names a third-party to the divorce case.  Joinder is the first step in obtaining an Order to divide City of San Diego benefits, and a separate joinder must be filed for each retirement plan that is going to be divided.  QDRO Helper can assist you with Joinders for a low flat fee – please see our pricing page for more information.

Division of Account / Separate Account

Generally, most divorce documents will specify that the former spouse of the City of San Diego employee) will receive ½ of the community interest in the plan.  The community interest is usually defined as what was contributed to the plan from the parties’ date of marriage to their date of separation.

The benefits awarded to the former spouse will be placed into a separate account established by the Plan and in the name of the former spouse upon receipt of a valid DRO.  The former spouse can leave the funds in the account with the Plan and begin receiving benefits upon the employee’s earliest retirement date, withdraw the funds (and pay the appropriate taxes and penalties), or roll the funds into another retirement account.

Account Information that Must Appear in the DRO

Domestic Relations Orders (DROs) for the City of San Diego 401(k), Deferred Compensation, and the SPSP and SPSP-H plans must specify the account balance as of the date of marriage and the date of separation.  In addition to the above, DROs for the SPSP plan must specify what percentage the employee is currently vested with the plan.  This information can be obtained from the Plan Administrator as part of the DRO process.

Gains & Losses

Unless the DRO states otherwise, gains and losses from the date of separation to the date that the separation of account or distribution to the former spouse occurs will be included in the award to the Former Spouse.

Death Benefits

If the plan member (the employee) dies before retirement, then the former spouse will be paid his/her share of any and all death benefits payable under the plan.  The former spouse’s share will be based on the same division or percentage of benefits awarded to him/her under the DRO.

Need Help?

If you need help with a City of San Diego DRO and/or Joinder, please visit QDRO Helper, or call 619-786-QDRO to get started today!

DISCLAIMER: Any legal information on this blog has been prepared by QDRO Helper for informational purposes only and should not be construed as legal advice. The material posted on this website is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Note that sending an e-mail to QDRO Helper does not create an attorney-client relationship, and none will be formed unless there is an express agreement between the firm and the individual.

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