Posts tagged ‘Sacramento QDRO attorney’

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.

SCERS DROs: Dividing Sacramento County Employees’ Retirement System Benefits in Divorce

SCERS QDRO: Sacramento Employees Retirement System- QDRO HelperSCERS & DIVORCE – WHAT IS A DRO?

Employees of Sacramento County are members of the Sacramento County Employees’ Retirement System (SCERS).  SCERS benefits take the form of a defined benefit plan, which means that the benefits paid to retired members are based upon a formula.  Retirement payments are based upon three factors: the member’s age at retirement, years of service, and salary.  In order to be vested in SCERS, members must have 10,440 service credits; members earn one service credit for each hour of pay.  Members make contributions to SCERS through regular payroll deductions and it is not possible to borrow funds from the SCERS retirement fund account.

Retirement benefits acquired during marriage, such as SCERS 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.  SCERS must have a valid, court-filed DRO that has been signed by both the parties and the judge in order to make payments directly to a non-member spouse.  Distributions of SCERS benefits are governed by Article 8.4 of the County Employees’ Retirement Law of 1937, which begins at Section 31685 of the California Government Code.  This legislation provides for the division of the community property interests of SCERS Members in accordance with the provisions of a Court order setting forth the terms and conditions of the dissolution of a Member’s marriage issued pursuant to Section 2610 of the Family Code.

MANDATORY JOINDER & OBTAINING INFORMATION

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.  SCERS requires a joinder to be filed and served on the plan before a Domestic Relations Order can be approved and implemented.  Both a joinder and DRO will be required before a non-member can begin receiving payments from SCERS.  Your family law attorney may have already completed a joinder; however, QDRO Helper also offers joinder services for a $200 Flat Fee.

As soon as a dissolution of marriage action is filed in court, the parties should notify SCERS in writing about the pending dissolution, including the parties’ date of marriage and separation, names, dates of birth, social security numbers and current contact information.  SCERS is required to maintain confidentiality of member’s records; however, either upon subpoena or written authorization from the SCERS member, the plan will provide a valuation of the Member’s account. The valuation will specify the approximate community property interest that the former spouse can either withdraw or receive as a monthly retirement allowance for life when eligible.

DIVISION OF BENEFITS

The most common method of division for a non-retired member is to award the non-member spouse 50% of the accumulated retirement contributions and service credit attributable to the period of service from the parties’ date of marriage through their date of separation.  Prior to the member’s retirement, a Nonmember may elect to establish a separate account and may exercise the same rights as a Member, except that a Nonmember is not eligible to apply for or receive a disability retirement allowance, a Nonmember’s pre-retirement death benefits shall consist of return of the contributions and interest in the Nonmember’s account, and a Nonmember is not eligible to participate in the election of trustees.  A Nonmember may retire and elect optional allowances.  SCERS will ensure that the combined benefits payable to the Member and Nonmember are the actuarial equivalent of the value of the benefit to which the Member would have been eligible had no division of the community property interest occurred.  Each party will have a separate account and will have exclusive control over his/her own account.

If a member is already retired at the time that DRO is implemented, SCERS will split the Member’s benefits and a separate account will not be created for the Nonmember.  Instead, the Nonmember will receive a portion of each payment made to the Member, typically the portion is based upon the Time Rule Formula.

NEED A SCERS DRO?

If you have questions about the division of SCERS 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 a friendly California QDRO attorney at info@qdrohelper.com.  We proudly assist clients throughout California and no in-office appointments are required.

If you have questions about your particular SCERS retirement benefits, you can contact SCERS at (916) 874-9119 or request information in writing addressed to Sacramento County Employees’ Retirement System, 980 9th Street, Suite 1900, Sacramento, CA 95814.

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.

619-786-QDRO / 619-786-7376 (phone) * 619-345-4687 (fax) * 5752 Oberlin Drive, Ste. 106, San Diego, CA 92121 * © The Law Office of Madeline L. Hill, d.b.a. QDRO Helper* All rights reserved.*   ***QDRO Helper is an efficient and affordable service that provides attorney drafted QDROs to individuals and family lawyers throughout California, including San Diego, Los Angeles, Bakersfield, Anaheim, Riverside, San Francisco, San Jose, Oakland, Fresno, and Sacramento. QDRO Helper offers a $500 flat fee QDRO option.*** THE MATERIAL CONTAINED ON THIS WEBSITE MAY BE CONSIDERED AN ADVERTISEMENT IN CALIFORNIA. QDRO Helper’s attorneys are only licensed to practice in the state of California. Any legal information on this website has been prepared by QDRO Helper for informational purposes only and should not be construed as legal advice and does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter. The content of this website is intended to comply with Rule 1-400 of the California Rules of Professional Conduct. 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. QDRO Helper and its attorneys have 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. 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. To the extent the State Bar rules requires us to designate a principal office and/or single attorney responsible for this site, QDRO Helper designates Madeline L. Hill as the attorney responsible for this site.
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