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QDRO was prepared incorrectly as a separate (rather than shared) interest


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My divorce was final 5/2017.  I was married 24 years.  My former spouse has worked as a police officer for 30 years. The QDRO to divide my former spouse's defined benefit retirement plan was completed about a year later.  QDRO was then approved by the Plan Administrator, sent to the court and the actuarial firm that manages the Plan approved the QDRO and sent me the paperwork this past August to begin distribution of my portion.  After reviewing the paperwork, I called the attorney who prepared the QDRO to inquire about the valuation date as I had understood it was to be the date of our divorce but instead the valuation date on the official paperwork was written as 7/2019.  The attorney then called me back and proceeded to say that she had conferred with the Plan Administrator who then told her that the QDRO was drafted incorrectly as a Separate Interest (with Survivorship) rather than a Shared Interest.  Furthermore, I was told that I would not be able to commence benefits until my former spouse retires (he has reached retirement age) and that the Shared Interest will not allow for Survivorship.  This is a real turnabout and greatly affects the equitable division of our monetary assets in the Divorce Agreement.  I have since retained an attorney and we are 4 months into a very slow process.  My question is simply when does a QDRO become "set in stone?"  At what point can one be assured that it is approved and settled without the worry that at some point in time there may be redress of it?  Also, does anyone here have experience with a situation like this where the Plan Administrator approved a Separate Interest QDRO "by mistake?"  I appreciate any feedback and advice.  Many thanks.

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I think you are confused.  A "shared" interest allocation provides for payments to the Alternate Payee if, as and when payments begin to be paid to the Participant.  On the death of the Participant a survivor annuity becomes payable to the Alternate Payee.  

With a "separate" interest allocation the Alternate Payee is awarded a share of the Participant's accrued benefit as of the date of the divorce.  There is no need for a survivor annuity since the Alternate Payee's share of a "separate" interest continues throughout her lifetime.  In a "separate" interest allocation it is as though the Alternate Payee had worked for the Employer and earner her own separate benefit. 

One of the major differences is that with a "separate" interest allocation the Alternate Payee does not have to wait until the Participant retires before the Alternate Payee can start to receive her share.  If the Participant is over age 50 and is eligible for retirement (age 50 rule under ERISA may or may not be applicable), then the Alternate Payee can elect to begin to receive her share regardless of whether or not the Participant has retired.  

Another difference is that the payments to an Alternate Payee in a "shared" allocation will be measured by the life expectancy of the Participant and then followed by a survivor annuity benefit, while the payments to an Alternate Payee in a "separate' interest allocation will be measured by the life expectancy of the Alternate Payee.  

Much will depend on whether the plan you are dealing with is a State, Count or Municipal Plan where the standard would be a "shared" interest allocation and where there is no option for a separate interest allocation.  If the Plan is a union plan. they often will offer the option for shared or separate.  Police pensions often don't have survivor annuity benefits for former spouses - only for current spouses.  

The difference between the two QDROs is not just a word or two.  The language is completely different.  

Also, if the Participant is retired when the QDRO is submitted, the only option is the "shared" interest approach.  

So your statement that the QDRO was drafted as "a Separate Interest (with Survivorship)" does not make sense.  The fact that you cannot get your share until her retires is a feature of a "shared" interest allocation and NOT a "separate" interest allocation, and the separate interest does not allow for survivorship since it is built in.  So you are stating it backwards.  

The bottom line is that the nature of the allocation of benefits is dependent on the language of the separation agreement or the language in the Judgment of Absolute Divorce ("JAD").   If the Agreement or the JAD uses words such as "if, and and when", then it's a "shared" allocation.  If the Agreement or the JAD refers to "vested benefit" at the time of divorce or "earned during the marriage", it's a "separate" interest allocation.  

Normally a QDRO can be changed from shared to separate, or vice versa, prior to the retirement of the Participant.  Once the Participant retires the only option is normally sharing.  Other factors that can create havoc would be the remarriage of the Participant followed by his retirement (if it's an ERISA qualified Plan which State, County and Municipal plans are generally not but Union plans may be), or the death of the Participant prior to approval of the QDRO and the ability of the QDRO to be entered post mortem per the Pension Protection Act of 2006 if it's a ERISA Plan, or if you are in a state where State, County and Municipal Plans can be entered post mortem even if ERISA does not apply, like Maryland.

Just to be clear.  The Plan doesn't approve a QDRO as a shared interest if it is not.  The QDRO cefines what it is, and the Plan Administrator approves or not.   You can call a fish a bird, but that doesn't make it so.  

Here is a Memo I prepared earlier this year re: shared v. separate.  Look at the one canoe/two canoe section showing the possible benefits/detriments of one over the other.    

Show this message to your attorney.  If he/she doesn't have a clue what I am talking about, get another attorney.  

David Goldberg 

Shared v. Separate For Pam.pdf

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A few small comments on David's response:

10 hours ago, fmsinc said:

A "shared" interest allocation provides for payments to the Alternate Payee if, as and when payments begin to be paid to the Participant.  On the death of the Participant a survivor annuity becomes payable to the Alternate Payee. 

I would say, on the death of the Participant a survivor annuity MAY BECOME payable to the Alternate Payee.  I have seen "shared interest" QDROs written that the AP receives no death benefits and all of the death benefit is paid to the current spouse.  In other words, the AP doesn't always receive the death benefit, but it depends on how the QDRO is written.

Also, since you said your husband was a police officer, it is also possible that the plan's QDRO procedures, or state/municipality are not permitted to accept a separate interest QDRO.  Generally, the administrator should have no opinion, so my first flag is when you said, 

On 12/11/2019 at 9:30 PM, lspann said:

Plan Administrator who then told her that the QDRO was drafted incorrectly as a Separate Interest (with Survivorship) rather than a Shared Interest.

This is not something the PA should not be in a position to change, unless there is some statutory reason why a separate interest isn't permitted, which might be possible with a police plan.   Either way, they can't just change it, but would need to document why that was an issue. 

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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