Defined Benefit Plans

TOP 3 QDRO MISTAKES & HOW TO AVOID THEM

QDRO MistakesQDRO MISTAKE 1: WRONG METHOD OF DIVISION FOR RETIREMENT PLAN TYPE

The language in the settlement agreement and QDRO should be applicable to the type of retirement benefits being divided.  There are two main types of retirement plans, namely 1) Defined Contribution Plans and 2) Defined Benefit Plans.  401(k), 403(b), and 457 deferred compensation plans are all types of “Defined Contribution Plans.”  The benefits under defined contribution plans are based upon actual monetary contributions to the plan, and the investment performance of said contributions.  Whereas, the benefits under defined benefit plans, commonly known as “traditional” pension plans, are paid as a monthly annuity based on a formula tied to the plan participant’s years of service credit, final salary, and age at retirement.  Defined Benefit plan benefits are not solely based on monetary contributions.

The language dividing defined contribution plans should (and conversely, the language dividing defined benefit plans should not):

  • Refer to the plan participant’s total account balance
  • Express the former spouse’s (alternate payee’s) interest as either a dollar amount or percentage of the account, as of a particular valuation date (usually the parties’ date of separation)
  • Address whether the alternate payee’s share should or should not be adjusted for interest or investment earnings
  • Provide for a new account to be created in the Alternate Payee’s name
  • Provide the option of an immediate distribution or rollover of Alternate Payee’s share

The language dividing defined contribution plans should not (and conversely, the language dividing defined benefit plans should):

  • Reference the Time Rule Formula or coverture formula
  • Reference the participant’s “accrued benefit”
  • Provide for a “monthly” benefit
  • Reference COLAs or early retirement subsidies
  • Address survivor benefits
  • Delay the alternate payee’s benefit commencement until the participant is eligible for retirement or actually retires

QDRO MISTAKE 2: QDRO PREPARATION TIMING

Ideally, the QDRO should be prepared as soon as the parties have reached a basic settlement regarding the division of the retirement asset.  This will allow the QDRO to be filed concurrently with the Judgment of Dissolution, or even be incorporated into the Judgment.  Otherwise, the QDRO should be prepared as soon to the time of divorce as possible.  If a QDRO is not filed and any of the following events happen, the alternate payee may entirely lose his/her benefits:

  • Participant terminates employment and takes a full plan distribution under a defined contribution plan
  • Participant retires and begins commencement of benefits without notifying the alternate payee
  • Participant dies without a QDRO in place securing survivor benefits for the alternate payee
  • Participant takes a loan out which significantly reduces the account balance available for division pursuant to a QDRO

For more consequences related to QDRO timing, click here.

Another problem that is becoming more and more common when parties wait to draft the QDRO is that plans sometimes undergo a change in plan administrator.  When a new plan administrator takes over, they will usually not perform any calculations regarding benefits accrued prior to their plan administration date.  For example, if the parties’ date of separation was in 2005, but the plan administrator changed in 2007, the plan administrator will reject a QDRO with a valuation date in 2005 because they do not have records prior to 2007.  This can present significant problems if the parties do not have their own plan statements for the time period from the date of marriage to date of separation; and will increase the expense involved in the QDRO as the parties may need to retain an actuary or accountant to perform a calculation to determine the community property interest in the benefits.

QDRO MISTAKE 3: BLINDLY TRUSTING THE MODEL QDRO

Some parties, or family law attorneys, will draft a QDRO by taking the plan’s “model” or “sample” QDRO and inserting the parties’ names with little or no other revisions.  This should never be done unless the parties and/or attorneys clearly understand every single provision within the model QDRO, and are aware of the possible alternate provisions, based on the plan’s terms and the California law regarding marital property rights.

Most model QDROs are drafted to favor the plan participant; they are not drafted to divide the benefits as equally as possible.  Model orders can heavily favor the participant with regard to issues like investment earnings and losses, and survivor benefits. Further, the model QDRO may have been drafted in a different state than where the divorce took place, which can have a huge effect on the division of benefits.  For example, in California, the community property interest stops accruing on the parties’ date of separation; however, other states utilize other dates, such as the date of divorce filing, or the date of the entry of Judgment of Dissolution, both which may be years after the parties’ date of separation.  Utilizing a model QDRO from another jurisdiction could have the effect of awarding the alternate payee far more benefits than he/she would legally be entitled to in California.  Further, many individuals who draft their own QDROs are not able to format the QDRO correctly to be accepted by the court that handled their divorce.  In California, QDROs must be signed by both parties and the judge; however, many model QDROs only leave space for the judge’s signature.

DO YOU NEED HELP WITH A QDRO?

If you have questions about the division of retirement benefits due to your California divorce or legal separation, or if you would like to get started on your Qualified Domestic Relations Order today, please call QDRO Helper at (619) 786-QDRO / (619) 786-7376.  You can also request a new client package by sending an email to info@qdrohelper.com or by visiting the Get Started page.  We proudly assist clients throughout the United States as long as the divorce or legal separation took place in California.

DISCLAIMER: ADVERTISEMENT. Any legal information on this blog has been prepared by QDRO Helper for informational purposes only and is not legal advice and does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter. The information provided is intended to comply with Rule 1-400 of the California Rules of Professional Conduct. Any links in this website are included only to help you locate other internet resources that may be of interest to you; QDRO Helper is not associated with any such links. The transmission and receipt of information contained on this website via the Internet or e-mail or in any other manner does not constitute or create an attorney-client relationship, and you should not act on the information contained herein without obtaining legal counsel. QDRO Helper has a strict policy of entering into attorney-client relationships with its clients only though the execution of a written fee agreement acknowledged by QDRO Helper. As such, you should not send QDRO Helper any confidential information in response to this web page until such a relationship is established and expressly acknowledged by QDRO Helper.

Cash Balance Plan QDROs

cash balance plan QDRO HelperSome employers offer a type of retirement plan known as a “cash balance plan” or “cash balance pension plan.”  Cash balance plans, like any other assets accrued during marriage, are community property and are subject to division pursuant to divorce in California.  We have already written blogs about the division defined benefit plans (i.e. traditional pension plans) and defined contribution plans (i.e. 401(k), 457, and 403(b) plans) by Qualified Domestic Relations Order (QDRO).  Cash balance plans are basically a hybrid between these two other plan types, but are classified as a type of defined benefit plan.  QDROs are also utilized to divide cash balance plans in divorce.

HOW A CASH BALANCE PLAN WORKS

A cash balance plan awards pension credits each year based on a percentage of the employee’s salary for that year.  The contributions made to the cash balance plan will also receive interest credits that are set at a predetermined rate by the plan (either a fixed rate or a variable rate linked to an index). In other words, the earnings on a cash balance account are based upon a predetermined interest rate and not tied to fluctuations of the stock market the way that earnings and losses on a 401(k) plan are.  The plan administrator will invest the funds and any increases or decreases in the value of the plan’s investments will not directly affect the benefit amounts paid to the employee.  Unlike a defined contribution plan, the amount of the employee’s earnings/interest is fixed and the investment risks and benefits are borne by the employer, not the employee.  Once the employee is eligible to receive benefits, the employee can choose either a monthly annuity or a lump sum distribution of his/her cash balance plan benefits.  You can learn more about Cash Balance Plans and how they differ from other types of retirement plans at the U.S. Department of Labor website.

CASH BALANCE PLAN QDRO ISSUES

It is critical for QDRO purposes to determine whether the cash balance plan was converted from a company’s previous defined benefit plan, or was initially created as a cash balance plan.  Many companies have converted their traditional pension plans to cash balance plans because it costs the employer much less to fund a cash balance plan than a traditional pension plan.  Regarding the method of division under a QDRO, if a plan was always a cash balance plan (i.e. there were no traditional pension benefit contributions), and the parties were married when the employee began participating in the plan, then the former spouse of the employee would be awarded a 50% of the account balance as of the parties’ date of separation, plus a proportionate share of annual interest credits.  However, if traditional pension benefits were earned during the marriage and then the plan converted to a cash balance plan, the QDRO must address how to divide both types of benefits earned.  Usually it is most accurate to apply the Time Rule Formula to the benefits accrued prior to the conversion (i.e. the benefits accrued under a traditional pension), and then to award the former spouse 50% of the contributions and interest credits from the date the plan converted to a cash balance plan through the parties’ date of separation.  The nature of the plan, the length of the employee’s employment, and whether the employee had a traditional pension plan that was converted to a cash balance plan during the marriage are critical issues for purposes of drafting a Qualified Domestic Relations Order.  As you can imagine, the language in your cash balance plan QDRO must be carefully drafted to address these issues.

DO YOU NEED HELP WITH A CASH BALANCE PLAN QDRO?

If you have questions about the division of a cash balance plan due to your California dissolution of marriage or legal separation, or if you would like to get started on your Qualified Domestic Relations Order today, please call QDRO Helper at (619) 786-QDRO / (619) 786-7376.  You can also request a new client package by sending an email to info@qdrohelper.com.  We proudly assist clients throughout the United States as long as the divorce or legal separation took place in California.

DISCLAIMER: ADVERTISEMENT.
Any legal information on this blog has been prepared by QDRO Helper for informational purposes only and is not legal advice and does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter. The information provided is intended to comply with Rule 1-400 of the California Rules of Professional Conduct. Any links in this website are included only to help you locate other Internet resources that may be of interest to you; QDRO Helper is not associated with any such links. The transmission and receipt of information contained on this website via the Internet or e-mail or in any other manner does not constitute or create an attorney-client relationship, and you should not act on the information contained herein without obtaining legal counsel. QDRO Helper has a strict policy of entering into attorney-client relationships with its clients only though the execution of a written fee agreement acknowledged by QDRO Helper. As such, you should not send QDRO Helper any confidential information in response to this web page until such a relationship is established and expressly acknowledged by QDRO Helper.

 

SBCERA DROs: Dividing San Bernardino County Employees’ Retirement Association Benefits in Divorce

SBCERA & Divorce: QDRO Helper California QDRO AttorneysSBCERA & DIVORCE – WHAT IS A DRO?

Employees of San Bernardino County are members of the San Bernardino Employees’ Retirement Association (SBCERA).  SBCERA is a public agency created to administer retirement benefits.  These retirement benefits take the form of a defined benefit plan, which means that the benefits paid to retired members are based upon a formula, not monetary contributions to an account (like a 401k plan).  Retirement payments are based upon the member’s age at retirement, years of service credit, highest 12 consecutive months of compensation, and the benefit formula.  There are two types of members under SBCERA: General member and Safety Members.

Retirement benefits acquired during marriage, such as SBCERA benefits, are subject to division during divorce.  The division of these benefits is accomplished by a special court order called a Domestic Relations Order or DRO.  The DRO directs the SBCERA to pay benefits directly to the non-employee spouse.  SBCERA cannot legally make payments to a member’s former spouse without a valid, court-filed DRO that has been signed by both the parties and the judge.

JOINDER REQUIREMENT

Joinder is a legal process that names a third-party claimant to a divorce case and notifies the retirement plan that a former spouse has a right to a portion of an employee’s benefits.  SBCERA requires a joinder to be filed and served on the plan before a Domestic Relations Order can be approved and implemented.  Joinder is the first step in obtaining an Order to divide SBCERA benefits.  Your family law attorney may have obtained a joinder; however, QDRO Helper also offers joinder services for a $200 Flat Fee.

DIVISION OF BENEFITS & RETIREMENT OPTION

Usually the non-member former spouse’s award is calculated as one-half of the benefits attributable to the member’s service in SBCERA during the time period from the parties’ date of marriage through their date of separation.  Your Domestic Relations Order (DRO) must specify the retirement option the member is to select at the time of retirement to provide for a continuance to a former spouse.  There are four options that can be used to provide survivor benefits, namely:

1. Unmodified Option –provides for a 60% continuance to an eligible surviving spouse. The former spouse may be entitled to a portion of a surviving spouse’s continuance. However, if the unmodified option was selected by the Member at retirement, but prior to the member’s divorce then the spouse named as the beneficiary at the time of retirement, which is now the former spouse, will no longer qualify for the unmodified continuance. This is pursuant to Government Code section 31760.1 or for death benefits under Government Code sections 31765, 31765.1, or 31786.

2. Option 2 – provides for a 100% continuance to the nominated beneficiary (i.e. former spouse).

3. Option 3 – provides for a 50% continuance to the nominated beneficiary (i.e. former spouse).

4. Option 4 – provides for various continuances to multiple beneficiaries, such as the former spouse and/or an eligible surviving spouse. Typically, the continuance is based on the calculation of a share of the benefit payable to the former spouse.

The DRO should also address pre-retirement death benefits in the event that the member dies during active employment.  Typically the former spouse is awarded one-half of the death benefits attributable to the member’s service in SBCERA during the time period from the parties’ date of marriage through their date of separation.

Unlike some other county retirement plans which offer “shared” or “separate” methods of division, SBCERA is unable to create separate accounts for the member and his/her former spouse.

NONMEMBER’S DEATH

The nonmember spouse has the right to name a beneficiary, or beneficiaries, for the nonmember’s share of the SBCERA benefits.  If the nonmember has not named a beneficiary, then the nonmember’s share of benefits will be paid to the nonmember’s estate.

NEED A SBCERA QDRO?

If you have questions about the division of SBCERA benefits due to your California dissolution of marriage or legal separation, or if you would like to get started on your Domestic Relations Order today, please call QDRO Helper at (619) 786-QDRO / (619) 786-7376.  You can also request a new client package by sending an email to info@qdrohelper.com.

DISCLAIMER: ADVERSTISEMENT. Any legal information on this blog has been prepared by QDRO Helper for informational purposes only and is not legal advice and does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter. The information provided is intended to comply with Rule 1-400 of the California Rules of Professional Conduct. Any links in this website are included only to help you locate other Internet resources that may be of interest to you; QDRO Helper is not associated with any such links. The transmission and receipt of information contained on this website via the Internet or e-mail or in any other manner does not constitute or create an attorney-client relationship, and you should not act on the information contained herein without obtaining legal counsel. QDRO Helper has a strict policy of entering into attorney-client relationships with its clients only though the execution of a written fee agreement acknowledged by QDRO Helper. As such, you should not send QDRO Helper any confidential information in response to this web page until such a relationship is established and expressly acknowledged by QDRO Helper.

KCERA DROs: Dividing Kern County Employees’ Retirement Association Benefits in Divorce

QDRO Helper: Bakersfield QDRO Attorneys - Kern County QDRO

KCERA & DIVORCE – GENERAL INFORMATION

Membership in the Kern County Employees’ Retirement Association (KCERA) is automatic for any employee who is appointed to a permanent position that meets certain hourly requirements.  Membership in KCERA begins on the first day of the payroll period following the employee’s date of hire, and every member is either a safety member or general member.  KCERA is a defined benefit plan that is administered by the Board of Retirement.  Like other types of assets acquired during marriage, KCERA benefits are subject to division during divorce.  The division of these benefits is accomplished by a special court order called a Domestic Relations Order or DRO.   Kern County also offers the Kern County 457 Deferred Compensation Plan to its employees; that plan is not addressed in this article, but the attorneys at QDRO Helper can also assist with the division of those deferred compensation plan benefits.

KCERA JOINDER REQUIREMENT & EFFECT OF JOINDER

Joinder is a legal process that names a third-party claimant to the parties’ divorce case.  In order for KCERA to respond to a DRO, pursuant to California Family Code §2060(b), a joinder must be filed and served on KCERA.  Joinder is the first step in obtaining an Order to divide Kern County Employees’ Retirement Association benefits.    Once the joinder is served on KCERA, KCERA will place a hold on the member’s account.  No funds will be paid out from the member’s KCERA account until the plan receives a DRO or court order that specifies the division of the benefits.  Until receipt of the joinder and DRO, the member will not be able to retire and begin receiving payments.  Further, if the parties divorce after retirement, as soon as KCERA is served with the joinder documents, KCERA will reduce benefit payments to the member by 50% until a court-approved DRO is received.  At that time, if the member was underpaid, the member will issue all underpaid benefits to the member.  Your divorce attorney may have already filed a joinder for you, if not, QDRO Helper offers joinder services for a reasonable $200 Flat Fee.

OBTAINING INFORMATION ABOUT KCERA BENEFITS

Individual retirement records are confidential; however, they can be disclosed to the member or to another person authorized by the member in writing to receive the records.  The records can also be released with the appropriate court order or subpoena.  At the member’s request, KCERA can provide an estimate of the community property share of the member’s account.  A request for that information should include the member’s name and social security number, the nonmember’s name, social security number and date of birth, the parties’ dates of marriage and separation.  KCERA can also provide information about the member’s date of hire and date of membership in KCERA.

DIVISION OF BENEFITS

Usually, the nonmember spouse is awarded one-half of the community property interest in the retirement benefits pursuant to the formula described in Marriage of Judd (1977), 68 Cal.App.3d 515, 522, also known as the Time Rule Formula.  You can read more about the Time Rule Formula here.

KCERA, unlike some other county government plans, does not currently offer the option to create a separate account on behalf of the nonmember spouse.  Instead, the nonmember spouse will receive a portion of each payment made to the member.   Since each payment to the nonmember spouse is only made when a payment is made to the member, a lifetime benefit to the nonmember spouse is not guaranteed and should not be assumed.

EFFECT OF NONMEMBER’S DEATH & MEMBER’S DEATH

If the nonmember spouse dies before payments commence under the DRO, the payments that would have been made to the nonmember spouse will instead be paid to the nonmember spouse’s estate.  If the member dies before retirement, the nonmember spouse will receive a pro-rata share of any survivor’s benefits which the plan is obligated to pay.

QUESTIONS ABOUT KCERA DROs?

If you have questions about the division of KCERA benefits, or if you would like to get started on your KCERA Domestic Relations Order today, please call QDRO Helper at (619) 786-QDRO / (619) 786-7376.  You can also request a new client package by email by clicking here.  We proudly serve clients who live in Bakersfield and throughout California – no in-office appointments required.

 

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, and readers should not act upon it without seeking professional counsel. Note also 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. We strongly advise against sending confidential or privileged information to QDRO Helper until you can establish such a relationship.

 

LACERA & Divorce: Dividing Los Angeles County Employees Retirement Association Benefits

LACERA DRO

Permanent employees of Los Angeles County or outside Districts who work three-quarter time or more are members of the Los Angeles County Employees Retirement Association (LACERA).  Any LACERA pension benefits that are accumulated during marriage are subject to division due to dissolution of marriage or termination of a registered domestic partnership.  Orders dividing retirement benefits are often called Qualified Domestic Relations Orders, or QDROs; however, LACERA is exempt from the provisions of the Employee Retirement Income Security Act (ERISA), and orders dividing LACERA benefits are called Domestic Relations Order or DROs.

REQUESTING INFORMATION ABOUT LACERA BENEFITS

LACERA is a defined benefit plan under which a member accumulates service credit.  Each LACERA member receives an Annual Benefit Statement which details the member’s accumulated service credit, contributions, and credited interest.  Members can also request information about their accounts by sending a written request to LACERA.  A person other than the Member can request the Member’s account information by either 1) providing written authorization, signed and dated by the Member within the 30 days prior to the information request or which is specifically valid for a longer time period; or 2) submitting a subpoena and Notice to Consumer, along with a $15 check for witness fees to the LACERA.

JOINDER REQUIRED FOR LACERA

LACERA must be joined before a DRO can be implemented.  Joinder is a legal process that names a third-party claimant to a divorce case; LACERA is a third-party claimant to any dissolution case which involves LACERA benefits.  The joinder will put LACERA on notice of the pending dissolution action and forthcoming DRO, and will give the court jurisdiction over LACERA.  A joinder will also place a hold on a active member’s account which will remain in place until the member retires.  The hold will prevent payment of a member’s benefit or a refund of accumulated contributions and interest until a DRO is received.  If needed, QDRO Helper can file the necessary joinder documents for you for an additional flat fee of $200.

LACERA RETIREMENT OPTIONS / OPTIONAL RETIREMENT ALLOWANCES

Various alternatives to the Unmodified Retirement Allowance are available under the County Employees Retirement Law of 1937 (CERL).  The different options allow for variations in determining how retirement and survivor benefits are paid, and who can be designated as a beneficiary.  Options 1-4 are summarized below:

• Option 1 (Government Code § 31761): If the member dies prior to receiving the contributions he or she paid into the retirement fund, Option 1 provides a single lump-sum payment (remaining balance of member’s accumulated contributions) to any named beneficiary. It does not provide a monthly survivor allowance. (Not available to Plan E members.)

• Option 2 (Government Code § 31762): Provides one named beneficiary with 100 percent of the member’s benefit, calculated on the date of death.

• Option 3 (Government Code § 31763): Provides one named beneficiary with 50 percent of the member’s benefit, calculated on the date of death.

• Option 4 (Government Code § 31764): Provides a customized lifetime benefit to one or more named beneficiaries via either a set monthly income or a fixed percentage of the member’s monthly allowance. The cost of customizing a benefit under Option 4 may be shared between the retired member and the non-member or the court may require one party to bear the cost.

Many divorcing members opt for Option 4 because it allows a member to name multiple beneficiaries amongst whom survivor benefits can be distributed – this can allow for survivor benefits to be paid to both a current spouse and the member’s former spouse.

TIME RULE FORMULA FOR DIVIDING LACERA BENEFITS

The most common method of dividing LACERA benefits is known as the Time Rule Formula.  This formula will provide that the non-member spouse’s share of the LACERA benefits is 50% times a fraction where the numerator is the number of months of LACERA service from the date of marriage to the date of separation, and the denominator is the total months of LACERA service accrued at the member’s retirement.

The Time Rule Formula will also apply if a member terminates employment and elects to receive a refund of accumulated contributions; providing the non-member spouse with a community property share of such refund of contributions.

QUESTIONS ABOUT DIVIDING LACERA BENEFITS?

If you have questions about dividing LACERA benefits or if you would like to get started on your DRO today, please call QDRO Helper at 619-786-QDRO (619-786-7376).  Alternatively, you can email info@qdrohelper.com and request a new client package for a LACERA DRO.  We are happy to assist clients throughout California – no in office appointments needed.

 

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, and readers should not act upon it without seeking professional counsel. Note also 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.

ICERS DROs: Dividing Imperial County Employees’ Retirement System Benefits During Divorce

ICERS & DICERS QDRO HelperIVORCE – GENERAL INFORMATION

Employees of Imperial County are members of the Imperial County Employees’ Retirement System (ICERS).  The retirement system is not a department of Imperial County government; instead it is a separate legal entity managed by the Board of Retirement which is responsible for the management of investments and benefits for ICERS members.  There are two types of ICERS membership: 1) Safety Members (employees in law enforcement, fire suppression and certain probation officers) or 2) General Members (all non-safety members).  Like other assets acquired during marriage, ICERS benefits are subject to division during divorce.  The division of these benefits is accomplished by a special court order called a Domestic Relations Order or DRO.  The law governing ICERS is Cal.Gov.Code §31450 et seq.

JOINDER REQUIREMENT

Joinder is a legal process that names a third-party claimant to the parties’ divorce case.  ICERS requires a joinder to be filed and served on the plan before a Domestic Relations Order can be approved and implemented.  Joinder is the first step in obtaining an Order to divide ICERS benefits.  Your family law attorney may have obtained a joinder; however, QDRO Helper also offers joinder services for a $200 Flat Fee.

REQUESTS FOR INFORMATION

The contents of a member’s file are confidential and can only be provided to the member or the member’s authorized representative.  In order for the nonmember to receive information about the Member’s account, ICERS must be joined to the action, and either i) a subpoena duces tecum must be served or ii) the member must provide ICERS with a written authorization to release information to the nonmember or the nonmember’s attorney.  ICERS has a policy for resisting subpoenas for information, so it is often best to obtain a court order against the member requiring him/her to execute the necessary written authorization.

DISSOLUTION OF DOMESTIC PARTNERSHIP & ICERS BENEFITS

ICERS benefits can be divided due to dissolution or termination of a registered domestic partnership, under The California Domestic Partner Rights and Responsibilities Act.  However, the federal government does not currently recognize domestic partners as spouses for tax purposes, which causes unique problems for domestic partners dividing a retirement benefits.  Domestic partners should contact both a tax advisor and ICERS regarding the unique challenges in dividing these benefits due to the dissolution of a domestic partnership.

NONMEMBER’S DEATH

The nonmember spouse has the right to name a beneficiary, or beneficiaries, for the nonmember’s share of the ICERS benefits.  If the DRO is prepared prior to the member’s retirement, then the nonmember’s beneficiary will receive any portion of the nonmember’s ICERS interest which is payable upon the nonmember’s death.  If the DRO is prepared and implemented after the member’s retirement, then the nonmember’s beneficiary will continue to receive the nonmember’s monthly payments until the death of the member.

REFUND OF RETIREMENT CONTRIBUTIONS

If a member is not retired at the time of drafting the DRO and does not have five years of accumulated service credit as of the parties’ date of separation, then the nonmember spouse will receive a refund of his/her share of the member’s accumulated retirement contributions and any interest thereon.

QUESTIONS ABOUT ICERS DROs?

If you have questions about the division of ICERS benefits due to your California dissolution of marriage or domestic partnership, or if you would like to get started on your Domestic Relations Order today, please call QDRO Helper at (619) 786-QDRO / (619) 786-7376 or click here to email us.

 

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, and readers should not act upon it without seeking professional counsel. Note also 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. We strongly advise against sending confidential or privileged information to QDRO Helper until you can establish such a relationship.

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.

OCERS QDROs: Orange County Employees Retirement System Benefits & Divorce

BASIC PLAN INFORMATION

Employees of Orange County earn retirement benefits under the Orange County Employees Retirement System (OCERS).  Both employers and employees (or “members”) make contributions to OCERS.  Upon retirement, OCERS provides a monthly benefit that is based on the type of plan, the employee’s age at retirement, average monthly earnings during employment, and the number of years of service.  Upon divorce, parties will require a Domestic Relations Order (or “DRO”) to divide the community property interest in OCERS benefits.  A DRO is a court order that provides the retirement plan with instructions about how to divide the benefits, and when to pay them, to the employee’s former spouse.

JOINDER REQUIREMENT

In order for OCERS to implement a Domestic Relations Order (“DRO”) the must be joined to the divorce proceeding.  Joinder is a legal process that names a third-party to an existing court case.  A joinder is the first step in obtaining a DRO to divide an OCERS benefit.  Your family law attorney may have prepared a joinder already; however, QDRO Helper can assist you with the preparation and service of a joinder for an additional $200 flat fee.

TYPICAL DIVISION OF OCERS BENEFITS: TIME RULE / BROWN / JUDD FORMULA

OCERS benefits, like many traditional pension plans, are most often divided using what is known as the
“Time Rule Formula”, “Brown Formula” or “Judd Formula”.  All three terms refer to a formula which utilizes a ratio between the time of employment during marriage and the total time of employment in order to calculate a former spouse’s share of retirement benefits.  Under these formulas, the community property portion of the accrued retirement benefit payable by the Plan is determined by a percentage of the benefit determined by a fraction, the numerator of which is the number of months the Member earned a benefit under the Plan during the marriage and the denominator of which is the total number of months the Member earned a benefit under the Plan through date of the Former Spouse’s benefit commencement date.  The Former Spouse’s benefit is determined by multiplying the community property portion by one-half.

Other options for division can be discussed as part of the divorce settlement process; however, your judgment or marital settlement agreement should not specify a specific lump sum dollar amount payment, as that is not a payment option under OCERS and any DRO specifying a lump sum payment will be rejected by the Plan.

DEATH AND SURVIVOR BENEFITS

If the Former Spouse dies before the Member, then all payments that would have been payable to the Former Spouse will be paid instead to the Former’s Spouse’s beneficiary or estate.

If the Member dies before the Former Spouse, the Former Spouse will receive a pro-rata share of any survivor benefits available under the Plan.  The pro-rata share will be determined using the same formula as was used to determine his/her community interest in the plan, such as the Judd Formula described above.

NEED HELP WITH AN OCERS DRO?

If you need help with an OCERS Domestic Relations Order, call QDRO Helper today at 619-786-7376.  You can also send an email to info@qdrohelper.com to request new client packet to divide an OCERS benefit.  Get started on your QDRO today by downloading forms here.  By utilizing technology, we are able to offer attorney-drafted QDROs to clients in Orange County, California, including Santa Ana, Irvine, Huntington Beach, Garden Grove, Fullerton, Costa Mesa, and Anaheim without any in-office appointments required.

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.

QDROs for Traditional Pension Plans / Defined Benefit Plans

Defined Benefit Plans are retirement plans which provide participants with a fixed payment on a regular basis (usually monthly) after retirement.  Defined Benefit plans are often thought of as traditional pension plans; these plans have become less common and are now being rapidly replaced with Defined Contribution plans by many employers.  Defined Benefit plans are based on a fixed formula (usually involving the participant’s age at retirement, years of service, and final pay), whereas Defined Contribution plans are based on investment performance and the value of an individual account.

FORMS OF BENEFIT FOR ALTERNATE PAYEE

The vast majority of defined benefit plans will not allow the non-employee spouse (“Alternate Payee”) to receive a lump sum cash payment.  Usually both the employee (“Participant”) and Alternate Payee will receive monthly payments after retirement.  You should be wary and check with the retirement plan if your lawyer has awarded one party a specific dollar amount from a defined benefit plan.

DEFINED BENEFIT PLAN TIMING

Benefits for defined benefit plans can usually only be paid to an Alternate Payee once the Participant reaches his/her “earliest retirement age” as allowed by the Plan.

METHODS OF DIVISION & SURVIVOR BENEFITS

Survivor benefits would depend on whether the plan allows for both shared and separate interest approaches for dividing benefits, and if they allow both, then which option the parties choose.  Usually, if a “separate interest” approach is used, the Alternate Payee’s share is actuarially adjusted to his/her lifetime, will be payable for the lifetime of the Alternate Payee, and often the Alternate Payee can name his/her own beneficiaries.  Usually under a “separate interest” method of division, the Alternate Payee will not receive any additional benefits upon the Participant’s death and the Alternate Payee’s share will not be affected in any way by the Participant’s benefits.

If the parties use a “shared interest” method of division, then it is typical for the Alternate Payee to receive survivor benefits.  QDROs can specify that the Participant must choose a form of payment that provides for survivor benefits at retirement.  Further, the survivor benefits under many plans can be based on the marital formula, which could potentially allow survivor benefits to be split between a former spouse and a current spouse.  However, not all plans allow survivor benefits to be paid to more than one individual.  Each plan’s particular options should be considered when negotiating the division of pension benefits due to divorce.

QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY (QPSA)

A Qualified Pre-retirement Survivor Annuity (QPSA) is a benefit paid to a Participant’s spouse if the Participant dies prior to retiring.  Under most defined benefit plans which offer QPSA benefits, it is possible to award either all or a portion of the QPSA to a former spouse via a QDRO.  If only a portion is awarded, it is typically a pro-rata share based on the portion of the retirement plan awarded under the QDRO.

NEED HELP WITH YOUR DEFINED BENEFIT PLAN QDRO?

If you need assistance with your QDRO, please call (619) 786-QDRO to speak with one of our helpful California QDRO attorneys today.  You can also visit QDRO Helper’s FAQ and Blog articles for more information.

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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