Previously 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the Cash Balance Benefit Program allows substitute and part-time teachers to earn benefits that upon retirement can be withdrawn, with accrued interest, as a lump-sum payment if the total earned exceeds $3500 or it can be rolled over into another plan.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://wilsonlawfirmca.com /.