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Early Retirement Incentives

By: Marvin Snyder

Q. What's the new, hot issue in QDROs?
A. Early retirement, and how it affects former spouse's benefits.

Q. Why the focus now on early retirement?
A. With downsizing in the workforce, many employees at all levels are facing forced or voluntary early retirement. In many cases, there is a "sweetener" added as an incentive to retire early.

Q. After divorce, how would the former spouse fare in early out?
A. If there is a QDRO in force, it depends on how it deals with early retirements.

Q. What if the QDRO is silent on early retirement?
A. In most cases, when the employee retires with early pension commencement, that triggers benefit payments also early to the former spouse as alternate payee.

Q. What's wrong with earlier payment of benefits to former spouse?
A. If the QDRO hasn't address the issue, the alternate payee will receive the "normal" early retirement pension, and that is reduced by the plan's standard early factors, which will cut down the former spouse's benefit. Meanwhile, the employee will probably be receiving an enhanced early out benefit in which former employee doesn't share.

Q. What if there is no hint of early retirement in the situation?
A. There may be nothing concerning earliness now, but both corporate and governmental needs and plans change. It is best to be prepared.

Q. May a QDRO have special early retirement provisions even though there is no special plan program in effect now?
A. Yes, and a properly drafted QDRO should allow for that.

Q. Are there any Federal guidelines concerning early retirement enhancements?
A. The legislative history of the Retirement Equity Act (the act that amended ERISA and created QDROs) allows the alternate payee to share in an early retirement enhancement that the participant receives.

Q. Is there a book on the subject which explains details?
A. Yes: Value of Pensions in Divorce by Marvin Snyder, Second Edition, with annual supplements, Aspen Law & Business, 36th Floor, 1185 Avenue of the Americas, New York, NY 10036.

PAC provides pension valuations, QDROs and actuarial reports for divorce attorneys and marriage dissolution mediators nationwide. Our Philadelphia offices are located in the suburb of Elkins Park, Pennsylvania, from where we serve the needs of legal professionals nationally, including east coast states such as New York, New Jersey, Virginia, North Carolina, Florida, Washington, D.C., and Maryland.