Shared QDRO - do you apply the J&S factor before or after the QDRO portion calculation (which includes a coverture fraction)?

I have a shared QDRO where the form of payment for the AP is whatever is chosen by the ptp. Doing the math, if I apply the calculation for the marital portion (50% of the marital portion calculated using a coverture fraction) first and then apply the J&S factor for the chosen form of payment to the two pieces I come up with different figures than if I apply the J&S factor to the whole benefit and THEN apply the marital portion calculation. Which method is correct?

I always apply the coverture fraction first.

I assume the participant can choose a different form of payment on the piece that isn't subject to the QDRO.  

Without diminishing respect for Effen’s and other pension practitioners’ methods:

What does the text of the court’s order tell its reader about which way to do the computations?

For a shared interest QDRO, AP is usually the beneficiary on the portion of benefits that are subject to a QDRO. You have one J&S factor and one coverture fraction. Result should be the same. What am I missing? 

You posted:  

"I have a shared QDRO where the form of payment for the AP is whatever is chosen by the ptp. Doing the math, if I apply the calculation for the marital portion (50% of the marital portion calculated using a coverture fraction) first and then apply the J&S factor for the chosen form of payment to the two pieces I come up with different figures than if I apply the J&S factor to the whole benefit and THEN apply the marital portion calculation. Which method is correct?

I assume you are dealing with as ERISA qualified defined benefit plan.  

I assume you are not dealing with a separate interest allocation. 

I assume that "J&S" stands for Qualified Joint and Survivor Annuity. 

I don't know what "QJSA" has to do with the retirement annuity part of the QDRO. 

I don't know what the coverture fraction has to do with the "QJSA". 

1.  If you have a shared allocation of the retirement annuity, the formula is -

50% of gross monthly retirement annuity, if, as and when paid to the Participant, multiplied a fraction, the numerator of which it the number of months of creditable service accrued by the Participant during the marriage of the parties, and the denominator of which is the total number of months of creditable service accredited by the Participant at the time of retirement.  The only variable is the "50%" and in many states the trial court has the discretion to vary that percentage to achieve an equitable distribution, however the truth is that 50% is almost universal.  The goal is the provide the Alternate Payee with 50% of the "marital portion" and to accomplish that goal you apply the coverture fraction.  

2.  If you are dealing with survivor annuity benefits you have more issues.  If, for example, the Participant retired during the marriage, he/she would have been required to elect a QJSA of not less than 50% of the gross retirement annuity, unless waived by the Alternate Payee. See - 26 CFR 1.401(a)-20 See https://www.law.cornell.edu/cfr/text/26/1.401(a)-20

 That election will survive a later divorce - and that sounds like what you are referring to in your post.   

If the Participant retires after the divorce, the QDRO will usually define the amount of the survivor annuity benefit.  In some plans it can be 25%, 33%, 50%, 66%, 75% or 100%. 

3.  I don't think I have ever seen a plan other than under FERS or CSRS where the amount of the survivor benefit is defined with reference to the coverture fraction. For example, under FERS and CSRS it is possible to use what they call a "prorata share" pursuant to 5 CFR 838.922(a) [see https://www.law.cornell.edu/cfr/text/5/838.922 ] as: 

        “(a) ‘Prorata share’ means the fraction of the maximum survivor annuity allowable under § 831.614 or § 842.613 of this chapter whose numerator is the number of months of Federal civilian and military service that the employee performed during the marriage and whose denominator is the total number of months of Federal civilian and military service performed by the employee.”  

I have never seen this sort of language in an ERISA qualified plan QDRO. Maybe I have never had to address that option in the 38 years that I have been preparing pension and retirement plan Orders. The PBGC model orders provide that an Alternate Payee can be awarded, for example, 40% of the QPSA benefit, and if the plan’s automatic survivor percentage for the QPSA is 50%, then the Alternate Payee will receive 20% of the Participant’s survivor benefit.  But I cannot find similar provisions in that related to ERISA qualified plans.  See https://www.pbgc.gov/wr/benefits/qdro

I suspect the language of the QDRO is causing your confusion.  If you want a better answer please provide a copy of the QDRO redacting only the names of the parties and the case number. And tell me what is the Plan's automatic QDSA percentage.

Perhaps the answer is to multiply the follow the model of the PBGC model oder and compute the fraction as set forth in 5 CFR.  838.922(a).  So if the coverture fraction is 240/300 = 80%, the Alternate receives 80% of the automatic 50% QJSA.    

David - 301-947-0500
 

MIchelleMaz,  what type of plan are you talking about?  ERISA or a public retirement?  The calculation depends in part on what type of plan we are talking about because some public plans do allow you to do a shared interest DRO (becuase they do not permit a separate interest), and then some also allow you to carve out the former spouse's share via the coverture fraction first and then have a J&S applied to only that portion of former spouse's awarded share.    So in that instance you would apply the coverture fraction first, apply the J&S factor to former spouse's share only and the participant can retire without a J&S applied to their remaining share.   I do a lot of pension valuations for all types of plans in community property and equitable distribution states so I can say there is no single answer until we have more detail on which plan is being divided!