QDRO Pension Distribution: Marital Benefit Period

[Mike D]

I divorced in 1994 after 10 years of marriage and had a QDRO drafted by an attorney who represented my wife and I (big mistake).  The QDRO specifies that my wife is to receive 50% of my current pension benefit, reduced by the fraction: number of years married / number of years worked for the company.  This gives her about 14% of my current pension value.  The issue is that my pension is based on my 3 highest years salary and I earn significantly more money today than I did when I divorced in 1994.  Additionally, in 2000 I quit the company but later returned to the same company in 2004 (10 years after the divorce).  I never cashed-out my pension.  At the time of my divorce, my income was about $70,000 per year and my lump sum pension estimate was $90,000 at age 65.  In 2020, my salary is about $200,000 per year and my pension estimate is $1,400,000.  Some of that increase related to salary and some is driven by low interest rates.  Based on the QDRO calculation, my ex-wife would receive about $200,000.  If the QDRO had based the calculation on my income at the time of divorce, my ex-wife would receive about $60,000.

This seems completely unfair.  My ex-wife is entitled to part of my pension as community property for the time period we were married. However, as written, the QDRO is allocating significant benefit to her for events that occurred 10+ years after our divorce.  Additionally, since I left the company in 2000, that would seem to put an end to the QDRO drafted in 1994.  I'd be willing to calculate her portion of the QDRO through 2000 because my income significantly increased after I left the company and subsequently returned.  Unfortunately, since the QDRO specifically names my company's pension, and since I'm still getting that same company pension, my company plans to calculate my ex-wife's share of my pension based on the current pension value.

Is this something I can take to the court and realistically get relief?  Would California courts be willing to change the QDRO almost 30 years after it was drafted and make the distribution more applicable to the marriage time period by adjusting the salary portion of my pension calculation?

[david rigby]

At the time the QDRO was prepared, the language you describe is awarding her a portion of any increase, which (conceptually) is no different than awarding alimony as a percent of future earnings. Your company plans to calculate her share based on the terms of the QDRO itself, not based on how you (later) wish it had been written.  How could they do differently?   

If you disagree with the interpretation of the QDRO, say so, and present your facts.  Get the advice of your own attorney (ie, one who is familiar with QDROs).  Just a hunch: it may not matter that you later describe it as "unfair".

[Mike D]

Thanks.  I would not dispute this based on feeling the QDRO is unfair. My dispute is based on the fact that the QDRO should award my ex-wife with a share of the community property associated with the time period that we were married, not the 30 years after we were married.  So I believe the QDRO should have been written to use my salary at the time of the divorce, not my salary 30 years later.  Additionally, since I quit the company in 2000, my opinion is that, at a minimum, the QDRO should have nothing to do with any pension dollars earned after 2000.

[Effen]

I assume the plan is still active and you are earning new benefits annually? 

The "fairness" is that your ultimate benefit is probably based on ALL of your service.  Those initial years when you were married still count in the determination of your ultimate benefit.  If the benefit formula is X% of your final average compensation, times years of service, those initial years are multiplied by your final compensation.  Therefore, the value of the benefit you earned in those initial years is based on your final average compensation.  Since you were married during that period, the AP is entitled to a share of the value of the benefit earned during that period.  This is a very common provision in QDROs.  

[JM]

I agree with Effen in that the early years are suppose to have the same value as the later years and this is how CA views community property in a defined benefit plan such as this.  Since your final salary applies to all years of service, CA requires the final accrued benefit be multiplied by the "time-rule".  (A rising tide lifts all boats).  An amended QDRO could be allowed by the court, but as an expert in CA in the valuation and division of retirement plans, I would say the QDRO was done correctly.