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OCERS QDROs: Orange County Employees Retirement System Benefits & Divorce

OCERS QDROs: Orange County Employees Retirement System Benefits & Divorce

by | Aug 23, 2012 | Defined Benefit Plans, General QDRO Info, OCERS, Public Employee Plans

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

by | Aug 21, 2012 | Defined Benefit Plans, General QDRO Info

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.

CalPERS & Divorce: What You Need to Know about DROs

CalPERS & Divorce: What You Need to Know about DROs

by | Aug 6, 2012 | CalPERS, General QDRO Info

The California Public Employees’ Retirement System (CalPERS) provides benefits to more than 1.6 million people.  If you or your former spouse is a CalPERS member, you should be aware of how CalPERS benefits can be divided due to divorce or legal separation.

CalPERS Community Property and Governing Law

Just like other assets acquired during marriage, California community property law allows CalPERS benefits to be divided upon dissolution or legal separation of a marriage or registered domestic partnership.  Unlike many private retirement plans, CalPERS is not bound by ERISA or Section 414(p) of the Internal Revenue Code; but is instead codified in the California Public Employee’s Retirement Law (PERL).  CalPERS is a defined benefit plan and is divided by filing a Domestic Relations Order (DRO) with the court and providing a certified copy to CalPERS.

First Steps: Notify CalPERS of the Claim & Requesting Information on a Member’s Account

One of the first steps that the nonmember should take to protect his/her interest is to send written notice to CalPERS that he/she will be making a claim for his/her share of the community property in a member’s account.  The written notice most commonly takes the form of a joinder, which is a legal document that joins CalPERS as a party to the dissolution or separation.  This will place a community property hold on the member’s account that can only be removed by submitting a court order or through other formal, written procedures.  This will ensure that CalPERS will release no benefits to an active member until the hold is removed, or will reduce a retired member’s monthly benefit by ½ until the hold is removed.

Legally, a member’s retirement file is confidential and can only be accessed by the member or his/her authorized representative.  However, information can be released to the nonmember and his/her attorney if either i) the member provides written authorization for the release of information, ii) CalPERS has been joined as a party to the legal separation or dissolution, or iii) a valid subpoena duces tecum is served on CalPERS.  Once CalPERS has a valid request for information, they will provide the following information:

  1. A statement of the member’s accumulated contributions and interest for the specific time period requested.
  2. A statement regarding the member’s years of service credit.
  3. A statement showing the member’s classification (i.e. State, local, or safety member) and the benefit formula applicable to the member.
  4. If the member is already retired, the plan will provide information about the option elected at retirement, the beneficiary, the amount of the gross monthly allowance, and details about any death benefit payable.
Methods of Division:  Separation of Account or Time Rule Formula

There are two methods of division for a CalPERS account, i) Separation of Account or ii) Time Rule Formula.  The Separation of Account method can only be used for members who are not yet retired.  The Time Rule Formula can be used by both retired and non-retired members.  Once a member is retired, rather than the time rule, a DRO can specify a flat dollar amount or percentage of the member’s monthly payments that should be payable to the nonmember spouse.  The main differences between the two methods of division are summarized in the chart below:

SEPARATION OF ACCOUNT  METHOD TIME RULE FORMULA
 Basic   method information  Allows the community property interest in a member’s pension to be separated into 2 accounts – one in the name of the   member and one in the name of the nonmember spouse.  Can only be used by active or inactive   members, not retired members. There will only be one account (in member’s   name) and nonmember spouse receives a lifetime benefit equal to his or her   community property interest.
How   Division of Benefits is Calculated The amount awarded to the nonmember spouse   is usually 50% of the member’s accumulated contributions, interest, and   associated service credit earned during the marriage.  Nonmember’smonthly benefit will be calculated using member’s   salary on the date of dissolution, the nonmember’s age at the date of   retirement, and the amount of service credit awarded to the nonmember spouse. CalPERS will calculate the service credit   earned from the date of marriage to date of separation, and what percentage   of the monthly benefit is payable to the former spouse as his/her community   property interest.  The calculation   will use member’s final compensation at time of retirement.
Nonmember   Spouse’s Benefit Commencement Possible when both parties reach the minimum   retirement age. Nonmember spouse’s interest can only be paid   by CalPERS at the time that benefits become payable (member’s retirement date   or death).
Nonmember   Spouse’s Payment Options Monthly allowance, or withdrawal by nonmeber   refund or rollover. Monthly allowance.  The DRO should also specify that CalPERS   should pay the nonmember spouse “by separate warrant” – otherwise the member   is responsible for paying the nonmember spouse each month.
Optional   Settlement at Retirement No restrictions on member’s election.Nonmember spouse can elect an option for   his/her account and name beneficiaries. Generally, a DRO states that a member must   elect optional settlement 4 and name nonmember spouse as beneficiary to the   extent of his/her community property interest. Parties should also negotiate   about how the cost of the benefit is to be applied, i.e. against the member’s   share, against the nonmember’s share, or equally.
Death   Benefits Member’s death does not affect Nonmember’s   spouse’s separate account.  Nonmember   spouse can designate a beneficiary for a one-time lump sum death benefit. Upon Member’s death Nonmember spouse   receives his/her community property interest in any lump sum or other death   benefits payable by the Plan, and any benefits required by the Option elected   at retirement.Upon Nonmember’s death, his/her share can   either i) stop and revert to the member or ii) be paid to Nonmember’s named   beneficiaries.
CalPERS Health Benefits and Divorce

Although health care can be provided under a CalPERS sponsored health plan, health benefits to a former spouse terminate on the last day of the month in which the marriage terminated.  CalPERS Health benefits are not subject to a Domestic Relations Order or DRO.

Other Concerns: Elective Service Credit, Cost-of-Living Increases, Waiver of Benefits

It is important to address any elective service credit in the DRO.  Elective service credit can be from service prior to membership, a redeposit of refunded contributions, any additional retirement service credit, or military service.  If the Domestic Relations Order does not address elective service credit, later purchases of credit or deposits of credit will be treated as the member’s separate property interest.

Generally a DRO will provide that the nonmember’s interest will increase proportionately with any cost-of-living increase or similar increase.  If this is not the parties’ intent, it should be addressed in their judgment or marital settlement agreement.

If it is the agreement of the parties that the nonmember spouse will forever waive his/her interest in all CalPERS benefits, a written Waiver of Community Property should be completed and given to the plan administrator or a court order or DRO should be filed that awards the entire CalPERS benefit to the Member.

Need Help With Your CalPERS DRO?

If you and your former spouse need assistance with dividing CalPERS benefits, you can email a knowledgeable QDRO lawyer at info@qdrohelper.com or call 619-786-QDRO to get started today!

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 the UCRP (University of California Retirement Plan)

QDROs for the UCRP (University of California Retirement Plan)

by | Jul 30, 2012 | General QDRO Info, University of California

Employees of the University of California are participants in the University of California Retirement System (UCRS).  The UCRS offers a defined benefit pension plan known as the University of California Retirement Plan (UCRP).  For certain UCRP participants, the CAP (Capital Accumulation Payment) provides a supplement to UCRP benefits.  CAP benefits can also be divided by QDRO and can be addressed in the same QDRO as the UCRP division.  The UC system also offers defined contribution plans – such as a 403(b) plan and a 457(b) Deferred Compensation Plan.  The UCRP is the focus of this article, an article about University of California defined contribution plans will follow at a later date.

Joinder Requirement

Joinder is a legal process that names a third-party (such as the UCRP) to the parties’ divorce case.  The University of California 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 UCRP benefits.  Once the joinder has been filed and served on the plan, both spouses can request information from the UCRP about the benefits earned by the member during the marriage and the nonmember’s options under a QDRO.  UCRP can provide the parties with the member and employer contributions and earnings for UCRP/CAP as well as service credit information, applicable offsets, and an estimate for the nonmember spouse’s lump sum cashout.

QDRO Before Member Retires

If a QDRO is filed before the Member retires, upon receipt and approval of a QDRO, a separate account will be created for the nonmember spouse (“alternate payee”) which includes his/her share of UCRP service credit, contributions and interest, and his/her share of the CAP.

If the member is not yet eligible to retire, the alternate payee can either i) elect to maintain the separate account, name his/her own beneficiary, and begin to collect benefits once the member is eligible for retirement, or ii) elect a refund on the contributions and interest in his/her separate account and waive all rights to future retirement benefits.

If the member is eligible to retire, the alternate payee may either i) elect a lump sum cashout of the actuarial value of monthly retirement income (the cashout is mandatory if a cashout would be less than $20,000) or ii) maintain his/her separate account until the Member elects to retire or dies, or iii) request a refund of his/her share of contributions and interest and waive all rights to future retirement benefits.

There are a myriad of scenarios that can affect benefits due to the death of the parties (such as whether the death occurs before or after retirement or if the member has less than 5 years of service credit), but generally speaking, an alternate payee’s share of benefits will not change because of the member’s death, and the alternate payee can name his/her own beneficiary.  It is important to note that the alternate payee can be named by the member as his/her contingent annuitant, and could receive additional benefits upon the member’s death.

QDRO After Member Retires

If the QDRO is processed after the member retires, the alternate payee will not have his/her own account; instead, the member’s retirement income is reduced to provide monthly payments to the alternate payee based on the amount awarded to the alternate payee under the QDRO.

Upon the member’s death prior to the death of the alternate payee, the alternate payee’s monthly payments cease.  However, if the alternate payee was named as the Member’s contingent annuitant, payments under the option will begin.  Further, the alternate payee will also receive some benefits if the QDRO provided for the basic death payment to be made to the alternate payee.  If no one else is eligible for survivor continuance or option portion, a prorata refund of the balance of UCRP accumulations will be paid to the alternate payee based on the division of benefits described in the QDRO.

Upon the alternate payee’s death prior to the death of the member, the alternate payee’s beneficiary will receive a lump sum payment of the remaining value of the alternate payee’s share of retirement benefits.  Benefits do not revert to the member upon the alternate payee’s death.  When the alternate payee dies after the participant, any contingent annuitant payment stops, but the alternate payee’s beneficiary can receive a prorata share of the balance of UCRP accumulations if no one is eligible for a survivor continuance.

It is important to realize that the Retired Member’s election that is made at retirement is binding as to the payment option elected and designation of Contingent Annuitant; it cannot be changed with a QDRO after retirement.

Need a UCRP QDRO?

If you need assistance with dividing your University of California Retirement System or UCRP benefits, please call 619-786-QDRO to speak with one of QDRO Helper’s friendly attorneys.  You can also email us at info@qdrohelper.com to request a new client package today!

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.