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QDROs & Loans: How Loans on Retirement Accounts Affect Divorce

by Madeline Hill | Mar 1, 2013 | Defined Contribution Plans, General QDRO Info

RETIREMENT PLAN LOANS & DIVORCE

Participants in defined contribution retirement plans often have the option of taking out loans. These loans are usually paid back via paycheck deductions over a period of years and these loans usually cannot be assigned to any other party for repayment. If a defined contribution plan, such as a 401(k), is divided during a divorce or legal separation, it is critical to address any outstanding loans.

HOW TO FIND OUT IF THERE IS AN OUTSTANDING LOAN

You should first look for an outstanding loan balance on the account statement. Sometimes there will be a clearly labeled section for loans. Other statements can be a bit more difficult to read, for example a statement may show an “account balance” of $25,000 but list the “total account value” at $35,000 elsewhere, which would indicate a $10,000 outstanding loan. Plan administrator’s usually consider outstanding loans as assets which should be added to the value of the account to determine the account’s true value. The participant in the plan is also required to make full disclosure of assets and obligations during a divorce and the marital settlement agreement should clearly address outstanding loans. If the participant represents that there are no loans, the settlement agreement should include a statement that the party “represents and warrants that he/she has not taken any loans or withdrawals from the [insert plan name] account, and he/she shall be prohibited from taking any loans or withdrawals until a QDRO is implemented by the plan, creating a separate interest for [the other party].” If a withdrawal or loan, in violation of the automatic temporary restraining order, is feared by the non-employee spouse a notice of adverse interest to the plan, or a joinder, will often cause a hold to be placed on the participant’s account pending receipt of a QDRO by the plan administrator.

IS A LOAN SEPARATE PROPERTY OR COMMUNITY PROPERTY?

If there is an outstanding loan, it must be determined whether the loan is community or separate property. Parties sometimes view any loan taken out from the date of marriage through the date of separation as community property; other parties will agree to look at what the loan funds were used for to determine if the loan is community property or separate property.

Separate Property Loans in QDROs

If a loan is determined to be the participant’s separate property, then the QDRO needs to be drafted carefully to award the correct amount to the former spouse (or “alternate payee”). For example, if a QDRO awards 50% of the participant’s account balance to the alternate payee as of the parties’ date of separation, but does not address loans, the alternate payee’s share could unintentionally be reduced by the value of the outstanding loan. By way of an example, if the account balance at the date of separation was $50,000, but there was an outstanding loan of $10,000, which would bring the total account value to $60,000, then the alternate payee may accidentally be awarded $25,000, instead of the $30,000 to which she is entitled due to a separate property loan. To ensure that the alternate payee’s share is not reduced by the other party’s separate property loan, the QDRO must include the loan balance in the account balance prior to calculating the 50% award to the alternate payee.

Community Property Loans in QDROs

Since it is usually not possible to make an alternate payee responsible for loan repayment under a QDRO, if a loan is determined to be community property, the QDRO must be carefully drafted to ensure that the alternate payee’s share of the account is reduced by an equal portion of the outstanding community property loan.

POTENTIAL FOR QDRO REJECTION DUE TO OUTSTANDING PLAN LOANS

Most retirement plans will not distribute funds in excess of the outstanding loan. If the parties have agreed to equalize assets and award the alternate payee 100% of the participant’s account, they should determine exactly what the dollar amount of the distribution will be under the terms of the plan before filing the QDRO. For example, if there is $30,000 in an account, plus a $5,000 outstanding loan, the plan will likely only distribute a maximum of $25,000 to the alternate payee. Alternatively, if a QDRO awards the alternate payee $30,000 in the same example, the QDRO will likely be rejected by the plan because the maximum that can be distributed under the plan’s terms would be $25,000.

QUESTIONS ABOUT LOANS AND QDROs?

If you have questions about the division of defined contribution plan accounts due to your California dissolution of marriage or legal separation 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: 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

by Madeline Hill | Feb 13, 2013 | Defined Benefit Plans, General QDRO Info, SBCERA San Bernardino

SBCERA & 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.

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 clicking here or 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.

Valuation Dates for QDROS: A Common Mistake in Marital Settlement Agreements

by Madeline Hill | Jan 31, 2013 | Defined Contribution Plans, General QDRO Info

WHAT IS A “VALUATION DATE” FOR QDRO PURPOSES?

A QDRO (Qualified Domestic Relations Order) is a court order that divides retirement benefits due to divorce. The valuation date for QDRO purposes is the date as of which the funds are to be divided. For example, in a QDRO for a 401(k) plan awarding 50% to the non-employee spouse with a valuation date of September 30, 2011, the plan will look at the Participant’s account balance on September 30, 2011 multiply the account by 50% in order to determine the non-employee spouse’s share. The plan administrator will not look at the current account balance at the time of actual division of the account, but will look at the account balance as of the valuation date.

VALUATION DATE PROBLEMS IN QDROS

Unfortunately, an issue which often makes the QDRO process more difficult is the lack of a valuation date in the parties’ Marital Settlement Agreement (“MSA”). A missing valuation date can lead to litigation at a later date. Your MSA should always state the date as of which the benefits are to be divided, or reference a date which is known and agreed to by the parties, i.e. “Wife is awarded 50% of the account balance as of the date of separation” or “Husband is awarded 50% of the account as of December 15, 2012.” Absent a specified date, one party may argue for the date of separation to be used, while another party may argue that the date of dissolution should be used. As can be imagined, the value of retirement benefits could vary greatly depending on the valuation date chosen, particularly since the date of separation and the date of dissolution can be more than a year apart. Other potential valuation dates are the date that a divorce petition is filed, the date the MSA was signed.

Typically, in California, the parties’ date of separation is viewed as the date that the community interest in the asset stops accruing. [In re Marriage of Bergman, 168 Cal. App. 3d 742 (1985)] However, other states view community property differently. For example, in Arizona, the accrual of community property typically terminates upon the service of the divorce petition on the other party; in Nevada, community property usually terminates upon the date of divorce.

Valuation dates are also an issue because often with QDROs for defined contribution plans, gains and losses are included in the alternate payee’s share from the valuation date to the date that the plan administrator actually segregates the account. Therefore, the further back the valuation date is from the date of account segregation, the greater the potential change in value of the alternate payee’s benefits.

If the parties are awarding the non-employee spouse a flat dollar amount, then the valuation date should be the date of account segregation by the plan administrator and the QDRO should specify that the parties do not intend for any gains or losses to be included in the alternate payee’s award.

Provisions should also be made in the event that the retirement plan only allows certain valuation dates. For example, some plans only allow valuation dates that are the last day of a month, or have valuation dates that can only be days that the New York Stock Exchange allows trading (i.e. excludes weekends or holidays). Ideally, the MSA should provide a valuation date and then also state “or the nearest valuation date under the Plan”.

The best practice is to ensure that the MSA clearly states the valuation date for dividing retirement assets and also allows for variations due to the valuation dates allowed under the terms of the retirement plan.

QUESTIONS ABOUT VALUATION DATES IN QDROS?

If you have questions about valuation dates in QDROs or if you would like to assistance with your MSA language or drafting your QDRO, please call QDRO Helper at 619-786-QDRO (619-786-7376) or email us at 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.

Waiver QDRO: Do I Need a QDRO if my Spouse Waives all Retirement Benefits?

by Madeline Hill | Jan 18, 2013 | General QDRO Info

WHAT IS A WAIVER? WHAT IS A QDRO?

Sometimes during divorce, the parties will agree that one spouse will forever waive his/her interest in the other spouse’s retirement plan. Often this is done as part of an equalization of property, other times the parties simply agree that they will each keep their own retirement plan. This “waiver” of one party’s community property interest in the other party’s retirement benefits is usually written out in the parties’ marital settlement agreement. A “waiver QDRO” can also be prepared to waive one party’s interest in retirement benefits.

The division of retirement benefits due to divorce is normally accomplished via a Qualified Domestic Relations Order or “QDRO.” A QDRO is a particular type of court order that divides retirement plan benefits between parties due to marital dissolution or legal separation. A QDRO creates and/or recognizes an employee’s former spouse’s right to receive all, none, or a portion of the benefits payable with respect to an employee under a retirement plan. QDROs are made pursuant to state domestic relations laws (such as California community property laws) and under federal law, such as the Internal Revenue Code and The Employee Retirement Income Security Act (ERISA).

DO I NEED A WAIVER QDRO?

Some retirement plans will require a QDRO even when the parties’ judgment or settlement agreement clearly states that the non-employee spouse has waived his/her right to any benefits. If the terms of the retirement plan require a QDRO, then the employee will not be able to retire and begin receiving payments until a QDRO is received by the plan. In that situation, a waiver QDRO should be prepared as soon as possible.

Many retirement plans do not require a QDRO in the case of a waiver of benefits; however, it is still the best practice to ensure that a waiver QDRO is filed with the court and submitted to the plan administrator. Filing a QDRO as close as possible to the date of dissolution will ensure that a waiver of benefits will be valid and will not become problematic at a later date.

One example of how a waiver in a divorce settlement agreement is not always effective is from the Supreme Court case of Kennedy v. Dupont, 129 S.Ct. 865 (1/26/2009). In that case, the parties had a valid divorce decree which stated that the Wife would not receive any interest in the Husband’s retirement benefits. However, many years prior to the divorce, Husband had completed a beneficiary designation with the plan administrator naming Wife as his beneficiary in the event of death. After the divorce, Husband never changed his beneficiary form to remove Wife. When Husband died, the plan paid his benefits to his former spouse, instead of his daughter. The retirement plan administrator followed the plan procedures and paid benefits to the named beneficiary, regardless of the divorce decree which included a waiver of the benefits. The Supreme Court held that the retirement plan administrator acted correctly, and that the parties’ divorce decree was not sufficient to serve as a QDRO; therefore, the plan document was controlling on what would happen to the deceased employee’s benefits. If the parties had prepared a QDRO which waived Wife’s right to any and all retirement benefits, then the plan would have paid the benefits to the employee’s daughter, instead of his former spouse.

Most divorce decrees or settlement agreements incorporated into judgments do not have the language required to qualify as a QDRO. To be recognized as a QDRO, an order must be: A judgment, decree, or order (including the approval of a property settlement) that is made pursuant to state domestic relations law (including community property law) and that relates to the provision of child support, alimony payments, or marital property rights for the benefit of a spouse, former spouse, child, or other dependent of a participant. Further, in order to be a QDRO, the court order must contain QDROs must contain the name and last known mailing address of the participant and each alternate payee; the name of each plan to which the order applies; the dollar amount or percentage (or the method of determining the amount or percentage) of the benefit to be paid to the alternate payee, and the number of payments or time period to which the order applies. There are additional provisions that a court order must not contain in order to qualify as a QDRO, such as:

The order must not require a plan to provide an alternate payee or participant with any type or form of benefit, or any option, not otherwise provided under the plan;
The order must not require a plan to provide for increased benefits (determined on the basis of actuarial value);
The order must not require a plan to pay benefits to an alternate payee that are required to be paid to another alternate payee under another order previously determined to be a QDRO, and;
The order must not require a plan to pay benefits to an alternate payee in the form of a qualified joint and survivor annuity for the lives of the alternate payee and his or her subsequent spouse.

If your divorce decree does not have all of the necessary provisions required to qualify as a QDRO, it is best to have a waiver QDRO prepared to ensure that the spouse’s waiver is truly valid pursuant to the retirement plan’s procedures.

BENEFICIARY DESIGNATIONS

It is critical that, after a divorce, the plan participant fills out a new beneficiary designation with each retirement plan in which he/she participates. Even if a Marital Settlement Agreement contains a waiver of all retirement benefits, the plan may still pay benefits to the participant’s former spouse if the former spouse was still listed as the beneficiary in the plan’s records. The recent case of Andochick v. Byrd in the Fourth Circuit Court of Appeals is one example of the problems that are created with inconsistent beneficiary designations and divorce judgment and settlement agreement language.

QUESTIONS ABOUT A WAIVER QDRO?

If you have questions about waiver QDROs, 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.

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.