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

by Madeline Hill | Jan 11, 2013 | Defined Benefit Plans, General QDRO Info, KCERA, Public Employee Plans

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 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 or 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.

What is the Brown Rule? What is the Time Rule Formula?

by Madeline Hill | Dec 12, 2012 | General QDRO Info

Background on the Brown Rule & the Time Rule Formula

A California court case from 1976 established that non-vested retirement benefits were community property, subject to division upon dissolution of marriage. This case was In Re Marriage of Brown (1976) 15 Cal. 3rd 838. After the Brown case, courts started utilizing a formula to divide retirement benefits – over time, this formula became known as the Time Rule Formula or the Brown Rule. The court in a dissolution of marriage action is authorized to divide community property equally, and must utilize a formula that will accomplish an equal division.

What is the Time Rule Formula?

When the Time Rule Formula is utilized, the community property interest in retirement benefits is determined by a fraction whose numerator is the employee’s length of service from the date of marriage through the date of separation, and whose denominator is the employee’s total length of service at retirement.

As a simplified example, if a spouse was married for 10 years during which time she worked for the same employer and accrued retirement benefits, but then retired after 20 total years of service with said employer, the community property interest in the retirement benefits would be 10/20 or 50%. The remaining 50% would be the employee’s separate property. Further, the community interest is divided equally between the parties, so the non-employee spouse would receive 25% of the total retirement benefits, and the employee spouse would receive 75% of the total retirement benefits.

Are the Brown Rule and Time Rule Formula Really the Same Thing?

Although many divorce attorneys use the terms “Brown Rule” and “Time Rule Formula” interchangeably, they are not actually the same thing. A 2007 case, In Re Marriage of Gray, established that the term “Brown Formula” was not always accepted as having the same meaning as the “Time Rule.” Instead, the court held that the basic principles from the Brown case were that i) nonvested pension rights are community property subject to division and ii) that the court may achieve division either by cashing out the nonemployee spouse through the reduction of the rights to the present value or by retaining jurisdiction to achieve the division later as the pension benefits accrue and are subject to payment. The Gray court determined that the Brown case, on its face, did not actually establish or promote what came to be known as the Time Rule formula, or any other specific formula, for dividing pensions in divorce. If it is the parties’ intention to utilize the formula described above, the Martial Settlement Agreement should state that the retirement benefits will be divided pursuant to the “Time Rule” not the “Brown formula.”

When Should the Time Rule Formula be Used?

The Time Rule Formula should only be used for defined benefit plans where the amount of retirement benefits is substantially related to the number of years of service. If the amount of benefits is related to another factor, a different formula may be needed. It should also be noted that the Time Rule is inappropriate for defined contribution plans, like 401(k) plans, because the benefits paid out at retirement are directly related to the contributions made and are not substantially related to the number of years of service. Further, the contributions made during the marriage are likely not equal to the contributions made before or after marriage.

Questions About Your California QDRO or the Time Rule or Brown Formula?

If you have questions about the division of retirement benefits in your divorce, or if you would like to get started on your QDRO today, please call QDRO Helper at 619-786-QDRO (619-786-7376) or click here to request a new client package.

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.

VCERA DROs: Dividing Ventura County Employees’ Retirement Association Benefits in Divorce

by Madeline Hill | Nov 28, 2012 | Defined Contribution Plans, General QDRO Info, VCERA - Ventura County

VCERA & DIVORCE – GENERAL INFORMATION

Employees of Ventura County are members of the Ventura County Employees’ Retirement Association (VCERA). Like other money or assets acquired during marriage, VCERA 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.

VCERA JOINDER REQUIREMENT

Joinder is a legal process that names a third-party claimant to the parties’ divorce case. In order for VCERA to respond to a DRO, a joinder must be filed and served on the plan. Joinder is the first step in obtaining an Order to divide Ventura County Employees’ Retirement Association benefits. Your divorce attorney may have already filed a joinder for you; however, if needed, QDRO Helper also offers joinder services.

DIVISION OF BENEFITS

Typically, the nonmember spouse is awarded one-half of the community property interest in the retirement benefits. There are two basic methods of division: i) a segregation of account method, where a separate account will be established by VCERA on behalf of the nonmember and ii) a shared method, where the nonmember spouse receives a portion of each payment made to the member. The shared method is the only option that can be utilized if the member has already retired. If the member is not retired, either the segregation method or shared method can be used. Under the segregation method, the nonmember has a variety of distribution options:

he/she may request a refund of contributions and interest (which can be “rolled over” into another qualifying plan), or
he/she can commence receipt of a monthly retirement benefit if eligible, or
he/she may maintain the account by electing a deferred retirement until such time as he/she elects either a refund of contributions and interest or becomes eligible to receive a monthly retirement benefit.

If a member is not vested, then the nonmember spouse can only utilize option 1 above. When the nonmember is paid a refund, the member will have five years to sign a contract that will allow the member to redeposit all contributions withdrawn, plus interest, in order to regain the service credit awarded and paid out to the nonmember spouse. The contract may be satisfied with payroll deductions over the course of five consecutive years (one hundred and thirty consecutive biweekly payments).

NONMEMBER’S DEATH

The nonmember spouse has the right to name a beneficiary, or beneficiaries, for the nonmember’s VCERA benefits. If the nonmember dies before the effective date of retirement, his/her accumulated contributions shall be paid to his/her designated beneficiary.

If the nonmember dies after the effective date of his/her retirement, if the total retirement allowance income received by the nonmember during his/her lifetime was less than his/her accumulated contributions, his/her designated beneficiary shall be paid in one lump-sum the difference between the total contributions and the total retirement allowance income.

QUESTIONS ABOUT VCERA DROs?

If you have questions about the division of VCERA benefits, 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. We proudly serve clients throughout California – no in-office appointments required. You can also view VCERA’s comprehensive divorce booklet here.

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.

San Luis Obispo County Pension Trust & Divorce

by Madeline Hill | Nov 14, 2012 | General QDRO Info, Public Employee Plans, SLO County Pension Trust

Every permanent employee of San Luis Obispo County is required to become a member of the San Luis Obispo County Pension Trust. Each member contributes a percentage of his/her salary to the Pension Trust; members can also make voluntary contributions. The employer also contributes a percentage of each member’s salary to the Pension Trust. Contributions made to the Pension Trust during marriage are considered community property and are subject to division under California law due to divorce or legal separation. The court order used to divide these retirement benefits is called a Domestic Relations Order or DRO. Under the DRO, the employee is called the “member” and the non-employee former spouse is called the “Alternate Payee”.

JOINDER REQUIREMENT FOR SLO COUNTY PENSION TRUST

The San Luis Obispo County Pension Trust must be joined before a DRO can be implemented. Joinder is a legal process that names a third-party claimant to a divorce case; the Pension Trust is a third-party claimant to any dissolution case which involves San Luis Obispo County Pension Trust benefits. The joinder will put the Plan on notice of the pending dissolution action and forthcoming DRO, and will give the court jurisdiction over the SLO County Pension Trust. Often divorce attorneys file the joinder as part of the dissolution proceedings. However, if needed, QDRO Helper can file the necessary joinder documents for you for an additional fee .

METHODS OF DIVISION

There are two basic methods utilized for dividing San Luis Obispo County Pension Trust benefits for active or reserve members. There is only one option for dividing the benefits of a member who has already retired. The methods of division are described below.

Method 1: Payout of the Alternate Payee’s Share at the Time the Member Retires or Dies

Under the first method of division, the Alternate Payee will receive a portion of each payment made to the member, or upon the member’s death, based upon his/her community property interest. Payments will only commence to the Alternate Payee either 1) upon the Member’s actual retirement or 2) upon the death of the Member. Typically, the Alternate Payee’s share is determined using the “Time Rule” formula, i.e. the Alternate Payee will receive 50% of the Member’s monthly retirement allowance multiplied by a fraction where the numerator is the Pension Trust Service Credit attributable to the Member’s employment during the marriage (from date of marriage through the date of separation), the denominator is the total of the Member’s Pension Trust Service Credit at the Effective Date of Retirement.

Under this method of division, the DRO may order the Member to elect a payment option that provides a survivor benefit annuity to the former spouse. The Optional Settlement that is to be elected by the Member must be specifically named in the DRO. There are 4 optional settlements that will allow for benefits to be paid to the former spouse upon Member’s death, aptly named Optional Settlement 1, Optional Settlement 2, Optional Settlement 3, and Optional Settlement 4. If the Member chooses and “Unmodified Retirement”, there are no survivor benefits and all payments to the Alternate Payee will cease upon the Member’s death. More information on the options available can be obtained by contacting the San Luis Obispo County Pension Trust.

Under method 1, if the Member ceases working for SLO County and elects to receive a refund of his/her contributions (which will not include contributions made by the employer), then the Alternate Payee would receive his/her share of the refunded contributions based on the formula specified in the DRO.

Method 2: Separate Account Established for the Alternate Payee

The second method of division for active members order the Plan to split the member’s service credit and contributions, and to establish a separate account for the Alternate Payee. This allows the Alternate Payee to decide on his/her own retirement option (either “Unmodified” or an “Optional Settlement” that names a beneficiary) and to have more control over when payments to the Alternate Payee will commence. Even if the Member is still working, the Alternate Payee can apply for and receive a refund of his/her share of the accumulated contributions available for refund. The Alternate Payee could can “retire” and begin receiving monthly annuity payments once the Member’s interest in the plan is vested and both the Member and Alternate Payee are 50 years old. The disadvantage of this method is that the Alternate Payee will not share in any increased value of the Member’s retirement allowance due to increases in compensation before retirement. The “compensation” factor of the annuity calculation is frozen as of the parties’ date of separation under Method 2. The Alternate Payee typically will be awarded 50% of the contributions made during the marriage – from the date of marriage through the date of separation.

Method 3: For Retired Members

Similar to Option 1 above, the Alternate Payee’s share will be calculated using the “Time Rule” and the Plan will make payments to the Alternate Payee until the retired Member’s death. Benefits will only be paid after the Member’s death if the Member chose an Optional Settlement at retirement and named the Alternate Payee as the beneficiary of the Optional Settlement. The option selected at retirement cannot be changed.

QUESTIONS ABOUT DIVIDING SAN LUIS OBISPO COUNTY PENSION TRUST BENEFITS?

If you have questions about dividing Pension Trust benefits or if you would like to get started on your DRO today, please call QDRO Helper at 619-786-QDRO (619-786-7376). Click here to request a new client package for a SLO County Pension Trust DRO. We proudly serve clients throughout California – no in-office appointments are 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.

Gillmore Rights and Your California QDRO

by Madeline Hill | Nov 9, 2012 | General QDRO Info

WHAT ARE GILLMORE RIGHTS?

Often an employee wants to continue working past her earliest retirement age. If the employee is divorced and her former spouse wants to start receiving benefit payments based on his community interest in the retirement plan, Gillmore rights allow him to start receiving his share of benefits before his former spouse actually retires. Specifically, these rights give an non-employee former spouse the ability to receive his/her community property share of the employee former spouse’s benefits at the earliest date on which the employee would be eligible to retire, regardless of whether the employee actually retires at that time. This option to commence benefits at the earliest retirement date is governed by federal law 29 USC §1056(d)(3)(E)(i); Internal Revenue Code §414(p)(4); and a California court case Marriage of Gillmore (1981) 29 C3d 418. These rights get their name from the Marriage of Gillmore case where the court determined that an employee who continues working past the date of retirement eligibility can be ordered to pay his/her former spouse his/her community share of benefits.

WHAT IS A GILLMORE ELECTION?

A “Gillmore Election” occurs when a non-employee spouse makes a motion in court to demand payment of benefits from the plan or the participant. (The process is started by filing form FL-300.) However, if a Qualified Domestic Relations Order is already in place granting the non-employee spouse a separate interest in the plan, the non-employee former spouse can simply contact the plan and commence receipt of benefits.

OTHER CONSIDERATIONS REGARDING GILLMORE RIGHTS

A Gillmore election is irrevocable. Therefore, if the non-employee former spouse commences benefits before the employee actually retires, the non-employee will not be entitled to share in any future benefit increases due to the employee’s continued service, increased age, or increased salary. The non-employee spouse will still be entitled to cost-of-living adjustments.

It is possible for parties to waive Gillmore rights explicitly as part of the divorce proceedings. However, parties should be aware that if they choose to divide retirement benefits by the Time Rule formula instead of a separation of account method, this can be construed as an implicit waiver of Gillmore rights, unless the QDRO states otherwise. Many plans, such as CalPERS, CalSTRS, and government plans require language in their Domestic Relations Orders stating that payments to the non-employee will not commence until the member actually retires and begins receiving payments. This is with regard to the plan and payments made directly by the plan only; a non-employee spouse could still seek court action against the former spouse to receive payments directly from the still-working employee.

QUESTIONS ABOUT YOUR CALIFORNIA QDRO OR GILLMORE RIGHTS?

If you have questions about Gillmore rights, dividing retirement benefits due to divorce, or if you would like to get started on your QDRO 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.

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.