Qualified Domestic Relations Orders (QDRO)
Attorneys in Rhode Island
QDRO’s and Defined Benefit Plans in Rhode Island
These types of retirement plans are more commonly referred to as “pensions”. A defined benefit plan is some set amount of money, paid to a Participant (employee), for their lifetime, beginning upon his or her retirement. These retirement plans, if accrued during the marriage, are subject to division in a divorce action. Although it can difficult to ascertain a specific value for these plans without an actuary, it is usually the largest asset that divorcing parties have that will need to be divided. The provisions of each employer’s plan are unique and therefore your attorney needs to be familiar with the terms of the plan and how it can be divided, before he or she can negotiate a division on your behalf.
The amount of the payment each month of a defined benefit plan is typically determined by the employee’s length of service with the company, the employee’s salary earned, and the employee’s age. Some of these plans also have a pre-retirement survivor benefit and a post-retirement survivor benefit as part of the plan. Some plans have one or the other, and some have both. These provisions determine what happens to the pension when the employee dies, depending on whether they are already retired, or not. The survivor benefit portion of the plan needs to be considered separately from the division of the plan itself, and should also be considered in the negotiations. In addition to the pension payments and the survivor benefit options, most defined benefit plans have other provisions to the plan that need to be addressed in a divorce as well.
QDRO / SUPPORT CASE RESULT
We were hired by the former wife to draft a QDRO and transfer 100% of the ex-husband’s 401(k) to her. These parties had been in the process of getting this done through their original attorneys for about a year with no success. We were able to get the QDRO done, and the 401(k) into the wife’s name very quickly. When all was said and done, she said,
“Kristy, this is all set, thanks to you. I cannot thank you enough. The process was started last August.”
Another important thing to note about defined benefit plans is that a spouse can usually be awarded a “separate interest” or a “shared interest” in the other spouse’s pension. Some plans only allow a shared interest approach, some only allow a separate interest approach, and some offer a choice. It is imperative for your attorney to be aware of how the plan allows the pension to be divided because these different interests determine when the former spouse will be eligible to collect their portion, and what actions the employee may still be able to take to affect the former spouse’s portion of the award.
If a party is awarded an interest in the other party’s pension, a Qualified Domestic Relations Order (QDRO) will be necessary in order to instruct a company to implement the division. A QDRO is a separate court order that must be drafted, entered by the court, and submitted to the employer for implementation.
The QDRO requires additional language that is typically not included in the Final Judgment or the Settlement Agreement, and must address all aspects of the division. The QDRO should address the specific plan to which it applies, the components of the plan and how those are to be divided, what will happen if either party dies prior to or after receiving their portion of the plan, and the amount awarded. Sample QDROs can be provided upon request from most employers. However, we caution spouses that most models are drafted in favor of the employee, and there may be additional options available that are not included in the models. Your attorney should be aware of all options before negotiating a settlement or starting a trial in order to avoid a further contest later, when the parties believe the divorce is “settled.” In our firm’s opinion, it is the best practice to include a draft QDRO as an Exhibit to a Settlement Agreement so there are no issues later, but this does not always happen.
We caution divorced spouses that QDROs are not typically included in your attorney’s original fees and not all attorneys will draft these types of orders. Most will tell you that someone else will need to be hired to do it at the conclusion of your divorce, but you may not have realized they did so at a time when you are focused on other things. If you have never seen a copy of the QDRO, or you never received correspondence from the Plan in your own name, a QDRO was probably never completed. Without a QDRO, you won’t get your portion of the Plan. The Court decree is not enough!
When dividing CSRS pensions, the survivor benefit is a maximum of 55%, or it can be awarded for any amount less than that, to a minimum figure, or none.
FERS survivor benefit can only be full (50%), Reduced (25%) or none. Cost for Full is 10%, cost for 25% is 5%.
For civil service, if Former Spouse (not employee) remarries before age 55, the benefit and survivor benefit ceases!!!!! Not like the military that only cancels out the survivor benefit. [I am still working to confirm this, as I can’t find any regulation that applies to the benefit itself, but the speaker at a CLE today from Illinois was adamant that she has seen it happen!!!] I am not confident that language saying that it will continue regardless of the marital status of either of them is sufficient either, as the government follows their own rules.
IF you think your attorney is not familiar enough with these types of plans to divide the asset properly; you think you should have had one done but are not sure it actually happened; or you’re an attorney who wants more information about what we charge and what we can provide to you with your case, please call us.