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

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is terminated, a member may withdraw his/her contributions; however, funds contributed by the employer cannot be withdrawn by the member.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 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

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 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

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.