Category Archives: QDRO

Distributing Retirement Benefits of Railroad Workers via Partition Orders

15039929_s (1)The Railroad Retirement Act (RRA) replaced the Social Security Act for establishing the kinds of benefits railroad workers earn during their careers in the field.  The plans which the employees participate are administered by the Railroad Retirement Board (RRB) which is an independent entity from the rest of the Executive Branch of government. The RRB only administers the funds of the employees of railway companies not the executives who own the railway companies.

 

When such railroad workers seek a divorce or separation from their spouse or decide to make plans to take care of their dependents, they can utilize an order, known as a Partition Order, which bears similarity to a Qualified Domestic Relations Order (QDRO). Partition Orders can be submitted to the RRB for approval. The order must comply with all RRB regulations. The orders can be used to distribute annuity payments to ex-spouses and children particularly when the children reach a certain age. It must be noted that railway annuity benefits have two components. As one of these, known as Tier 1 benefits, constitute non-divisible annuity assets, and they cannot be distributed by such orders.

 

A partition order which authorizes division of benefits must include the following:

 

  1. The Final Divorce Decree or other Order of a Court
  2.  Citations of necessary statutory or regulatory authority providing a basis for partition
  3. Statement of how the Assets are to be specifically divided
  4. Language imposing the obligation to make the stated distributions on the RRB
  5. Statement of Award showing how the division is being made

 

A certified copy of the Partition Order must be sent to the RRB’s General Counsel’s office in Chicago, Illinois. Former spouses must sign an Agreement of Spouse or Former Spouse. While there are several other specific requirements related to the successful completion of a Partition Order, the outline shown above includes the general items necessary to prepare such an order.

 

The Wilson Law Firm, a Professional Corporation, at 1120 Iron Point Rd Suite 100, Folsom, CA 95630 represents parties involved in domestic relations disputes.  Call The Wilson Law Firm, a Professional Corporation at the firm’s office at: 916-608-8891 to set up an appointment to speak with Attorney Dennis Wilson or visit its website at http://www.wilsonlawfirmca.com /.

 

What is a CSRS Order and What Can it Accomplish

7477317_sFor employees of the federal government, there are 2 different benefit systems in which the employees may accrue their retirement benefits.  Civil servants maintain their funds in the Civil Service Retirement System (CSRS), and other federal employees are in the Federal Employee Retirement System (FERS). Just as qualified domestic relations orders (QDROs) govern division of ERISA controlled benefits for an employee who works for a private company, each of these two federal systems has orders that can achieve some of the same purposes.

 

In the event that members of either system divorce, get a legal separation or wish to plan for some other form of domestic relations contingency, a legal instrument known as a CSRS orders can achieve the following:

 

  • Divide a CSRs annuity
  • Divide a refund of a CSRS employee retirement contribution
  • Provide a survivor annuity benefit upon death of an employee or retiree
  • Allow for a former spouse to continue health care coverage under the Federal Employees Health Benefit Program (FEHBP)
  • Require a former spouse to cover his children under the FEHBP
  • Ensure that a former spouse assigns his or her Federal Employee Group Life Insurance Coverage (FEGLI) to a former spouse or child
  • Require a former spouse to name his child or children as beneficiaries under coverage provide by FEGLI

 

It should be noted that such benefits can be garnished for purposes of paying child support, alimony or for damages related to child abuse.  This may distinguish these benefits from those of other types of retirement accounts.

 

The Wilson Law Firm, a Professional Corporation, at 1120 Iron Point Rd Suite 100, Folsom, CA 95630 represents parties involved in domestic relations disputes.  Call The Wilson Law Firm, a Professional Corporation at the firm’s office at: 916-608-8891 to set up an appointment to speak with Attorney Dennis Wilson or visit its website at http://www.wilsonlawfirmca.com /.

What is a FERS Order and What Does It Accomplish

9196480_sFor employees of the federal government, there are 2 different benefit systems in which the employees may accrue their retirement benefits.  Civil servants maintain their funds in the Civil Service Retirement System (CSRS), and other federal employees are in the Federal Employee Retirement System (FERS). Just as qualified domestic relations orders (QDROs) govern division of ERISA controlled benefits for an employee who works for a private company, each of these two federal systems has orders that achieve some of the same purposes.

 

In the event that members of either system divorce, get a legal separation or wish to plan for some other form of domestic relations contingency, a legal instrument known as a FERS orders can achieve the following:

 

  • Divide a FERS annuity
  • Divide a refund of a FERS employee retirement contribution
  • Provide a survivor annuity benefit upon death of an employee or retiree
  • Allow for a former spouse to continue health care coverage under the Federal Employees Health Benefit Program (FEHBP)
  • Require a former spouse to cover his children under the FEHBP
  • Ensure that a former spouse assigns his or her Federal Employee Group Life Insurance Coverage (FEGLI) to a former spouse or child
  • Require a former spouse to name his child or children as beneficiaries under coverage provide by FEGLI

 

It should be noted that such benefits can be garnished for purposes of paying child support, alimony or for damages related to child abuse.  This may distinguish these benefits from those of other types of retirement accounts.

 

The Wilson Law Firm, a Professional Corporation, at 1120 Iron Point Rd Suite 100, Folsom, CA 95630 represents parties involved in domestic relations disputes.  Call The Wilson Law Firm, a Professional Corporation at the firm’s office at: 916-608-8891 to set up an appointment to speak with Attorney Dennis Wilson or visit its website at http://www.wilsonlawfirmca.com /.

 

What is a STRS Order and How is it Used

14351898_sPreviously we discussed the purpose and role of Qualified Domestic Relations Orders, or QDROs on this site. Such orders, which require judicial approval in the context of a divorce proceeding or legal separation, govern the distribution to the other spouse of ERISA governed retirement benefits after divorce or legal separation – or to other identified beneficiaries.

In California, teachers who are members of the California State Teachers’ Retirement System, more commonly known as CalSTRS or STRS, participate in this system to earn benefits for retirement purposes. These teachers may face the same issue of how to divide benefits with spouses or partners upon divorce or legal separation. This article first explains certain options California teachers have when establishing their retirement plans and then addresses how STRS Orders, like QDROs, serve as necessary legal instruments to distribute retirement benefits.

Members of CalSTRS can participate in one or more of three possible benefit plans: Defined Benefit Program, Defined Benefit Supplement, and Cash Balance plan. Those with just the Defined Benefit plan earn a lifetime benefit determined by 3 factors of the member’s employment: (1) service credit, (2) final compensation, and (3) age. For the members of that program who continued to teach after the year 2000 the Defined Benefit Supplement gave them an opportunity to also qualify for supplemental benefits. The third option, the Cash Balance Benefit Program allows substitute and part-time teachers to earn benefits that upon retirement can be withdrawn, with accrued interest, as a lump-sum payment if the total earned exceeds $3500 or it can be rolled over into another plan.

For members of CalSTRS requiring a STRSOrder for purposes of distributing benefits, there are two types of division: (1) the time-rule formula and (2) the segregation method. Retired individuals must use the first formula although active members may use it. Active members – those who continue to work as a teacher may also opt for the segregation method of dividing benefits provided that the member is not also receiving disability benefits. Under the time-rule formula, a non-member spouse would receive a portion of the member’s monthly benefit, said percentage determined using the service credit earned during the period of the marriage. By contrast, those nonmembers receiving benefits per the segregation method would receive 50% of the service credit (contributions + interest) during the time of the marriage through separation. After the California court approves the STRS order, it is submitted to CalSTRS. This method allows each party to control that party’s own account unless there are longevity bonuses or other enhancements that are applicable to the account. The plan administrator will rely on the court-approved STRS order to make the appropriate distributions.

The Wilson Law Firm, a Professional Corporation, at 1120 Iron Point Rd Suite 100, Folsom, CA 95630 represents parties involved in domestic relations disputes.  Call The Wilson Law Firm, a Professional Corporation at the firm’s office at: 916-608-8891 to set up an appointment to speak with Attorney Dennis Wilson or visit its website at http://www.wilsonlawfirmca.com /.

Necessary Language in Military Pension Orders

Servicemembers Civil Relief Act As discussed in previous blog posts on this subject, military pension orders provide for the division of a service member’s pension benefits to ex-spouses after the completion of a divorce, separation, annulment or dissolution of a marriage. The military pension order must include certain information in order to be honored by the Defense Finance and Accounting Service (DFAS), which will issue payments to the stated beneficiaries. (Of course, these orders also must be approved as part of a divorce action or separation proceeding and must be incorporated into such court’s final decree.)

 

Because the division of military pension benefits is not governed by ERISA, there is no requirement for a separate order from the judgment itself.  The division may be contained in clauses in the judgment, or the parties may uses a separate order.

 

In order to effectuate a successful division for the military member and his or her ex-spouse, the pension division clauses must include:

 

1. The names and addresses of the parties, as well as their SSN’s;

 

2. The years of marriage and of military service;

 

3. The military member’s grade or rank;

 

4. A statement that the Servicemembers Civil Relief Act (SCRA) rights of the member have been honored (if the member is on active duty when the decree is entered)

 

5. Jurisdictional findings (domicile, consent, or residence) under 10 U.S.C. 1408 (c)(4);

 

6. A statement that DFAS should pay the spouse at his/her address as shown therein.

 

7. A statement as to what DFAS will pay the spouse, and this must be a fixed dollar amount per month or a percentage of the monthly payment

 

These elements must be included in any military pension clause or order so as to ensure that DFAS will be able to make payments in a manner consistent with the intent of the parties.

 

Payments are made once a month, starting no earlier than 90 days after service of the decree on DFAS or the start of retired pay, whichever is later. The payments end no later than the death of the member or spouse, whichever occurs first. Payments are prospective only; no arrears are allowed.

 

 

The Wilson Law Firm, a Professional Corporation, at 1120 Iron Point Rd Suite 100, Folsom, CA 95630 represents parties involved in domestic relations disputes.  Call The Wilson Law Firm, a Professional Corporation at the firm’s office at: 916-608-8891 to set up an appointment to speak with Attorney Dennis Wilson or visit its website at http://www.wilsonlawfirmca.com /.

Using the Time-Rule Formula in STRS Orders to Divide Benefits

Time-Rule FormulaIn California, retirement benefits are part of the community property of marriage and partnership and may be affected by dissolution of marriage, divorce, legal separation or termination of domestic partnership. These actions can require the allocation of retirement benefits between the parties. For California public school teachers, the CalSTRS system will implement any agreed division so long as it is reflected in a domestic relations order, known as a STRS Order.  The STRS Order must be incorporated in to any divorce decree or separation order by the presiding judge of such judicial proceeding. Before submitting the STRS Order to the court, the order should be approved by CalSTRS.

 

One method for dividing the benefits is the time-rule method.  This method can apply to retirement and disability benefits. It is regularly used in divorce cases and separations to calculate the portion of the member’s Defined Benefit and Defined Benefit supplement that the nonmember spouse will eventually receive.  The formula takes the amount of time one earns service benefits during the course of the marriage as a member in the system and divides it by the total amount of service time. For someone who works as a teacher for a total of 20 years but only 10 of those years while married, this obviously reflects a community percentage of 50%. In a community property state, the property of a marriage is to be shared equally. Accordingly, in this example, the non-member spouse or partner would be entitled to 25% (0.50 x 0.50) of the member’s benefits.

 

This 0.25 share owed the non-employee spouse or partner must then be applied to the resulting monthly benefit to be paid out upon retirement. That benefit may include a longevity bonus as well as the regular benefit, provided the member worked beyond a certain duration of time. In any event, the 25% (or 0.25) is multiplied by this total monthly benefit to determine what is paid to the non-member eventually.

 

Some members also receive a Defined Benefit Supplement.  This supplement can also be included in the calculation, but the contributions and interest awarded to the nonmember spouse will be removed from the member account.  (Such account segregations can only be done before a member receives a retirement or disability benefit.) However, if the Defined Benefit supplement is the only type of benefit being distributed, then a different formula, known as the segregation method must be utilized to ascertain the amount to be paid by the ex-spouse or partner.

 

The Wilson Law Firm, a Professional Corporation, at 1120 Iron Point Rd Suite 100, Folsom, CA 95630 represents parties involved in domestic relations disputes.  Call The Wilson Law Firm, a Professional Corporation at the firm’s office at: 916-608-8891 to set up an appointment to speak with Attorney Dennis Wilson or visit its website at http://www.wilsonlawfirmca.com /.

Critical Elements of STRS Orders Using Time-Rule Method

STRS OrdersCalifornia’s public school teachers accrue retirement benefits in accounts which are administered by the CalSTRS system. LikeCalPERS, CalSTRS has a procedure for  dividing funds or future benefits with ex-spouses or former partners in connection with a divorce, legal separation, or some other domestic relatons plan for the future.  The member and non-membermust agree to the terms and conditions of a STRS order STRS orders must be approved by both CalSTRS and the court.  If the parties do not agree, then the court will impose its own order.

One of the four methods by which benefits can be distributed is the time-rule formula. Retired individuals must use this formula, and active members may employ it. Under the time-rule formula, a non-member spouse would receive a portion of the member’s monthly benefit, said percentage determined using the service credit earned during the period of the marriage. A second method is the segregation method, i.e., creating a new account for the non-member. In addition to the two primary methods of division (time rule and segregation of accounts), the court order may state that when a member receives a benefit, the nonmember spouse will get a predetermined percentage or flat dollar amount.

A STRS order must address the following issues:

  1. Types of benefits (retirement, refund, disability and/or  lump-sum death benefits)
  2. Payment by separate warrant; i.e., whether CalSTRS pays the non-member directly or the member must pay out of his or her funds
  3. Contingency where member dies before nonmember spouse
  4. Court-ordered election of an option (different percentages can be prescribed)
  5. Contingency where non-member spouse dies before member
  6. When lump-sum death benefit is to be paid out

Teachers facing the need to plan for such distributions should retain legal counsel with knowledge in preparing STRS orders and experience in securing their approval, so that the order will effectuate the intent of the parties involved.

The Wilson Law Firm, a Professional Corporation, at 1120 Iron Point Rd Suite 100, Folsom, CA 95630 represents parties involved in domestic relations disputes.  Call The Wilson Law Firm, a Professional Corporation at the firm’s office at: 916-608-8891 to set up an appointment to speak with Attorney Dennis Wilson or visit its website at http://www.wilsonlawfirmca.com /.