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DB pensioner is required by a QDRO to share half of his pension with h


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Under a QDRO a DB pensioner is required to share half of his pension with his former wife. Must he do this under a joint annuitant option where the cost is about 7%? Or can he request the Trustees to simply use the Single life option and then divide by 2? Each will, therefore, receive their own single life annuity without incurring the 7% cost.

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That would generally be determined by the terms of the QDRO. Most QDROs I have seen assign some fixed $ or percent, based on the normal form of payment, usually a life annuity.

But since a QDRO cannot require a plan to pay out more (measured in total actuarial value), then the administration of the order may necessitate recognizing one or more equivalence factors.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Just to elaborate on pax' comments, the decision as to survivor benefits (resulting in the reduction) is a separate decision from the amount or the percent of the pension to be split. The former spouse may or may not be named as beneficiary.

One common QDRO approach is the "separate interest" approach, in which the pension is divided in two, with each having the ability to have it paid in the form he/she desires. In this case, they would negotiate any death benefits separately, or would be free to do as they chose, i.e. one could have a pension with survivor benefits, one a life annuity.

Another way of doing it is that any payments from the plan get split in two.

Either way, death benefits would be a negotiated item among the former spouses whether there would be survivor benefits paid to the other, or to anyone else, resulting in the reduction.

These issues, and the payment options, should be specified in the QDRO. If not, it may fall short of the standards of being "qualified".

The DOL's website has a publication on QDRO's which I highly recommend. I've referred clients to it who have detailed questions.

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You need to get information from the plan administrator or it equivalent to determine what the plan allows by way of division of benefits under a QDRO. For example, a so-called "shared payment" division may not be allowed if the order is received before the participant is in pay status. Also, if the plan is a governmental plan, be prepared for great complexity and little enlightenment. Among other things, the QDRO may be affected more by state law than the provisions of section 414(p) that control QDROs under private employer plans. What you learn from conventional sources, such as Department of Labor publications, may not be definitive.

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