Shared Interest or Separate Interest?

[Scott]

I know, I know--I should post this on the QDRO board. I have, but the traffic on that board is very light, so I thought I would post it here too since it relates to a DB plan.

H retired and elected a 100% J&S annuity under his pension plan. H currently receives about $5,000 per month. H is divorcing W, but wants to provide for her as much as possible, and is willing to provide that, upon his death, W will remain as the beneficiary (based on age, current health and genes, it is more likely that H will die first). Basically, the intent is for each party to receive $2,500 for the rest of H's life, and then upon his death, W will receive $5,000 for the rest of her life.

H's attorney has drafted a proposed QDRO as a separate interest QDRO, giving each party 50% of the present value of the accrued benefit as of the date of divorce, with W to receive a life annuity (or any other optional form under the plan other than a J&S with a future spouse). The QDRO says that "W will be treated as the surviving spouse of H solely to the extent necessary to provide W with a death benefit under the provisions of this Order, and to the same extent any future spouse of H shall not be treated as a spouse of H for such purposes. This provision shall have no effect after W has been paid the amount of plan benefits due to her pursuant to this Order. The death benefit payable to W under the terms of the Plan shall be calculated based on the accrued benefit of H awarded to W in this Order."

The quoted language seems a bit unclear and I'm not sure it clearly states the parties' intent. In any event, wouldn't it be better to do this as a shared interest QDRO, giving each party 50% of the current distribution and provide that W will be treated as H's surviving spouse for all purposes? Not only would it accomplish the intent described above, but it would also allow H to recoup 50% of the benefit in the event that W were to die first, rather than having W's interest go away at her death.

Any thoughts?

[Andy the Actuary]

Attorney's recommendation is not only unduly complicated but contrary to DBness. The annuity start date has passed so cannot alter distribution option. Upon H's death, W get's $5,000 so that part is satisfied automatically by virtue of option elected and W is "the" surviving spouse.

Seems like QDRO only needs to assign $2,500 to W during joint lifetime with QDRO assignment ceasing upon first to die of H and W.

You barristers out there should chime in if this old actuary has spoken out of turn.

[david rigby]

I agree w/ Andy.

What if we ignore the QDRO and H pays W alimony of $2500 per month? Is it the same result (except no QDRO expense)?

[david rigby]

The hazard of posting duplicate messages:

http://benefitslink.com/boards/index.php?showtopic=42810