JM

I think the AP needs to complete the IRS "W-8Ben" form as a non-citizen AP.

Yes, the former spouse can receive a different dollar amount while employee is alive and then a different amount if former spouse was named for FSSA and employee predeceases. It can be set to be $0, less but still greater than $0, equal or more than what former spouse was receiving while both parties are alive.

Hi Effen, The former spouse survivor annuity (FSSA) is a court ordered survivor benefit for a former spouse that can be up to the maximum survivorship allowed under the plan (CSRS is 55% of self only and FERS Is 50% of self only). The court order can award a portion of the max FSSA as well with the remainder of the available survivorship going to the employees current spouse, etc. The term "pro-rata" is often used in COAPs and this term has two meanings. If applied to the self only then it's 50% of the typical coverture fraction applied to total monthly = former spouse's benefit, but if "pro-rata" is also applied to the FSSA then it's actually 100% of coverture fraction awarded former spouse. You can award a specific $ or % of the FSSA as well, so really all boils down to what the COAP said.

Hello Effen, Yes, the correct term for a CSRS or FERS order is a "COAP" but they are all Domestic Relations Orders so "DRO" is sufficient. You cannot say "QDRO" as that is a term associated with ERISA plans for which CSRS/FERS is not. But as the order on file was deemed acceptable for processing (or else the former spouse would not be getting a share of the pension), we really do not need to worry about what it's called. The Attorney Handbook states that unless the COAP is specific as to the survivor benefit amount, the maximum former spouse survivor annuity would be paid. OPM would have issued a letter to both parties outlining their interpretation of the COAP and how much the survivor benefit would be assuming the retiree died immediately. The retiree's paystub may also indicate the survivor benefit currently in effect and/or they can call OPM to get confirmation. A few things to note as well: (1) If the order was silent as to who pays the cost to provide the survivor benefit then OPM will deduct it from the retiree's benefit only. That means your friend may be paying the cost for the former spouse's survivor annuity! (2) If the order is silent as to what happens upon the former spouse's death if they predecease the retiree, the former spouses share will revert back to the retiree and not go to former spouse's estate. I would check the COAP to see if that is covered..but with four paragraphs I'm guessing no. (3) If the former spouse remarried prior to their age 55 then the survivor benefit is terminated..so if that happened here OPM needs to be notified. (4). The Majauskas formula is the typical marital/coverture fraction found in many states to determine the marital/community property interest. It is possible that OPM interpreted this formula to be applied to the maximum former spouse survivor annuity (what OPM calls the "pro-rata" approach...and pro-rata has two distinct definitions under the CFR), so it may be that the survivor benefit, if still in play, is based on the Majauskas formula and not the maximum survivor benefit. -JM

We have discussed this issue at length in CA and we have a family law statute which allows a court to make an order dividing marital property in an intact marriage: PART 4. MANAGEMENT AND CONTROL OF MARITAL PROPERTY [1100 - 1103] ( Part 4 enacted by Stats. 1992, Ch. 162, Sec. 10. ) (b) A court may order an accounting of the property and obligations of the parties to a marriage and may determine the rights of ownership in, the beneficial enjoyment of, or access to, community property, and the classification of all property of the parties to a marriage. We believe it may be possible to get a QDRO entered with a state court of competent jurisdiction and served on the plan. I do not believe a plan administrator is allowed to look behind the intent of a court order so if it otherwise qualifies as a QDRO then it must be approved. Whether the IRS will take issue with this new approach to financial planning we do not know, but all of our QDRO attorneys in CA have thus far decided to decline any request for an In Marriage QDRO.

Thanks Peter and I completely agree with you!

I'm curious to know if anyone has any language for use in a multi-employer plan QDRO that addresses how the AP's share will be affected in the event that the participant receives either a lump sum or installment payments as a result of the Plan's qualifying for funds under the recent Butch Lewis Act? Thanks in advance!

Thanks SSRRS! Also, check out §1.411(d)-4 and §411(d)(6) on what is protected and what is not regarding various types of benefits.

My two cents is the term wear-away (or whatever you end up calling it) should clearly be defined in the plan document so anyone can understand it's intended meaning. But with that said I have seen many summary plan descriptions where there is a certain benefit formula up to xx/xx/xxxx or up to xx years of service and then a second formula (which could be an increased accrual rate or a decreased accrual rate) for all years after the cut-off. Some say to lump it all together for the final benefit and some do not to avoid wear-away.

To follow up on ESOP Guys comment..you could also submit your Judgment to the plan as the QDRO which they will almost certainly reject. But that should put an administrative hold on the account giving you time to perfect the actual QDRO. I have seen that done in the past. If a CA plan then you can file a "joinder" but they are not required to accept it..but many do!

Hello Perplexed, the short answer is nothing really changes. Still need to make sure it's filed with the court and accepted by the plan, etc., but termination does not necessarily change anything. Specifics depend on the type of plan (defined contribution vs. defined benefit) and if the participant was vested in the plan at the time of termination, but assuming there is a vested account balance or accrued benefit then the QDRO can/will still apply.

It would be A because you cannot award an AP an unvested benefit in a QDRO. So AP gets $2500 and P has $2500 vested and $5k unvested. However, the QDRO could say AP gets 50% of the total (so $5k) and that would be paid from the vested source only leaving P $5k all unvested subject to future vesting. While that's not necessarily fair you could also draft one QDRO awarding AP 50% of vested ($2.5k) and reserve jurisdiction over unvested and later on enter a supplemental QDRO to capture the additional amount due AP once that part of the account vests.

I agree with Marshal Willick, Mark Sullivan or John Camp (https://www.johncamplaw.com/).

Also, the tax cost basis must be pro-rata under IRC 72(m)(10) and if there is a brokeragelink (brokerage window) then those funds would need to be converted back to standard investment options as they will not pay the alternate payee anything from a brokeragelink sub-account.

There are two types of survivor benefits, a pre-retirement survivor benefit (QPSA) and a post retirement survivor benefit (QJSA). Sounds like poor QDRO drafting as the plan will not pay former spouse their awarded interest if the participant dies before either participant or former spouse elects their share. That's why the QDRO must court order that the former spouse is named "surviving spouse" for purposes of the pre-retirement QPSA (usually limited to just the former spouse's awarded interest...not the entire QPSA). If that isn't in the QDRO and he dies before either has elected their benefit former spouse gets nothing. This could lead to a malpractice suit against the QDRO preparer, etc...but still fixable now so if this is what has happened then I would agree with former spouse the QDRO should be amended. But, former spouse should not get the entire QPSA (just her awarded interest) and should not get any of the QJSA assuming she is getting her own lifetime benefit once she elects directly from the plan.

Footnote 10 in Kennedy v. Dupon (2009) 129 S. Ct. 865; 172 L. Ed. 2nd may be of interest as well.

YES! ...should now be divided...is what I meant. I blame my fat fingers! Thank you Mike for the correction.

I agree with all of the above. You may have a "missed asset" meaning the pension was overlooked in your Judgment. In CA at least, if there is a marital/community interest in the pension at all then it applies to all pension payments (including those already received by your ex). Unless the plan has been withholding a portion of the benefit because they were on notice of a pending QDRO, you are probably stuck with a post-retirement shared interest order. You have no payment options in that case and you are stuck with whatever he elected at retirement. It is possible to value the past payments you may be due and roll them (actuarial adjustment) into the future division. You definitely need an attorney to review if your current Judgment required your ex to elect a survivor benefit for you, etc and then present to the court to determine how the pension should not be divided. Once you have that sorted and the court has made a ruling on the division of the pension then the QDRO will be relatively easy to draft. Just my two cents!

If the DRO was prepared and a request for order was approved by the court then the Judge can sign off on it making it an Order instead of Stipulation and Order. The plan does not care if the parties signed off, only the court and they will review and determine if a QDRO or not. One issue that could present a problem here is that if you were already divorced at the time of her death without a QDRO in place, her beneficiary designation on file with the plan could take precedence over the QDRO. If she did not have a current spouse at the time of her death and your Judgment clearly awarded you an interest, my experience is that the plan will usually honor a posthumous QDRO. However, you may need to talk to an attorney if the plan or her estate raises any issues with the validity of your QDRO. This post should only be taken as general information only and should not be relied upon as legal, financial or tax advice.

Agree with QDROphile. A QDRO only need the following to qualify: What information must a domestic relations order contain to qualify as a QDRO under ERISA? QDROs must contain the following information: -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. [ERISA § 206(d)(3)(C)(i)-(iv); IRC § 414(p)(2)(A)-(D)]

David is correct and you should talk to a QDRO attorney to be sure, but company bankruptcy is a completely different issue than retirement plan termination. Assuming this is a qualified plan then there would be a pension trust not subject to company creditors and therefore the plan may still be in existence. In CA there is case law regarding pension enhancements such as a plan incentive to retire early (something not written into the plan document) or a plan early retirement subsidy which is written in the plan document. Just a thought and recommend you seek out a QDRO attorney for assistance.

Hello Mongo, while it is possible to amend the existing QDRO or perhaps enter an IRA transfer order to take back any possible overpayment (both of which must be approved by the court first), I wonder if there really was an error in the amount transferred to your prior spouse. In CA the amount typically awarded to an alternate payee in a 401k QDRO is "50% of the date of separation balance" (assuming there is no pre-marital separate property), but that amount is then adjusted by investment experience from the date of separation through the date of payment or rollover to an IRA in alternate payee's name. So is the $300k she received due to earnings on the initial $216k award? If you look at the SP500 and other indices of stocks/bonds, that increase of about $84k seems in line to me.

Lots of variables here as others have pointed out, but the QDRO should have been done as a "separate interest" if covered under ERISA and filed prior to his retirement. That means he can elect a single life annuity for his share and your share would be payable to you for your lifetime. If that is what the QDRO provided but the plan overlooked the QDRO, etc., then you should hire a pension attorney to argue the plan should still pay you a separate interest over your own lifetime and they will have to eat the loss.

I would talk to a pension attorney as I see two issues here. First, it would be possible to amend the prior QDRO to clarify gains/losses through date of distribution are to be included. The other option is to challenge the plan on their ability to recoup a payment in error. There are cases out there on this issue and the IRS Employee Plans Compliance Resolution System or EPCRS, says recovery is not always required. Check out Pensionrights.org and talk to an attorney on how best to proceed.

I agree with Patricia...best to contact an attorney regarding your divorce. Many times the divorce is finalized and the QDRO is supposed to get finalized but never does. Sounds like the prior spouse had their QDRO in place and is receiving their awarded share...so if you did not waive your interest in the pension you can still get the QDRO done to receive your awarded interest. Only wrinkle is if he is retired you're probably no longer able to get a benefit over your own lifetime.