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!

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