QDRO Concepts and Pointers
By: Mark K. Altschuler and Marvin Snyder
The corporate downsizing trend and resulting forced or voluntary early retirement is creating a hot new topic in QDROs: the early retirement enhancement. The concept that early retirement enhancements are marital property is an important aspect to consider in equitable distribution. There have been notable court decisions recently on this issue. In Pennsylvania, the Gordon decision, allows, but does not mandate, that early retirement enhancements be included in a QDRO. The Meyer case has decided this issue and found that early retirement enhancements are marital property. Pension Analysis Consultants (PAC) knows these cases well; PAC actuaries have testified twice in the Gordon case, both in 1990 and 1997, and PAC was cited in the decision in Meyer.
In QDROs that comply with the Employment Retirement Income Security Act (ERISA), the issue is separate interest vs. shared interest and how this relates to survivor benefits. Under the Retirement Equity Act, the alternate payee in a QDRO is the surviving spouse regarding the marital portion of the pension. Since most ERISA plans allow a separate interest QDRO based upon the alternate payee's lifetime, the survivor benefit is implicit in such a QDRO. In a shared interest (or piggyback) QDRO, the survivor benefit must be structured. PAC's expert testimony was cited in the Pennsylvania Superior Court decision on the survivor benefit in the Palladino case.
In government, non-ERISA plans, PAC is well versed in the Civil Service Retirement System Court Order Acceptable for Processing (COAP), including the fine points of cost of living adjustments, disability, reversion of benefits, the Former Spouse Survivor Annuity, and in Pennsylvania, the Cornbleth Social Security offset.
Another area of challenge is created in the QDRO-type orders for the Public School Employes' Retirement System and the State Employes' Retirement System. These court orders are called Approved Domestic Relations Orders (ADRO). These complex retirement systems have many variables that need to be considered to create the proper ADRO. Enough variables for consideration, actually, that ADRO alone have been the subject of several PAC seminars at various county bar associations and private law firms. For example, an ADRO can create a lump sum award, or an annuity, or a combination of both. In addition, how should the withdrawal of accumulated employee contributions be handled? What is the marital portion of such contributions? What happens if the Member dies? The actuaries at PAC are familiar with the survivor annuity and how to tailor this to the case at hand, including the issue of who bears the cost of a survivor annuity.
Model orders are available for most private and government plans. But model orders should be used with extreme caution, and should be adapted carefully for your particular case and any contingencies.
In QDROs for Defined Contribution (DC) plans, many plans, such as Lucent and AT&T, will not calculate earnings on a balance as of a past date. These plans will not accept a QDRO stating an award as a balance as of a prior date certain, plus earnings on that balance. PAC's experience with valuing defined contribution plans is highly useful in performing these calculations. In fact, PAC has developed a computer algorithm for this calculation based upon the time weighted rate of return method.
For non-qualified Supplemental Executive Retirement (SERP) Plans, PAC has developed a method for obtaining payment in most cases, using an if-as-when Domestic Relations Order.
PAC has produced literally thousands of draft QDROs over the past twenty years. PAC has the solid experience and proven expertise to create a draft QDRO or adapt a model order for your particular client's plan, engineered to your cases' particular needs. For your QDRO drafting needs, contact the Pension Analysis Consultants at PAC.
Cost is always an important factor, PAC QDRO experts charge attorneys $420 to draft a QDRO, (or equivalent Court Order: MCO, DRO, COAP, etc.) The discounted fee for each additional concurrently requested Order is $370. There is no extra charge for Plan revisions.
Additional savings in time and expense can be gained by requesting our QDRO PRE_APPROVAL SERVICE. When applicable, and at no additional fee, PAC QDRO experts will draft the perfect QDRO, send it directly to the Plan, and interact directly with the Plan, giving you a Plan Pre-Approved QDRO, ready to take to Court for Signature.
How can PAC draft a QDRO for me? Just send PAC the completed request form for your case, a copy of the settlement agreement or divorce order, and a check or credit card info for the fee. If you are not an attorney, or a client who is not retaining an attorney, please use our "Pro Se" QDRO Request Form. The Pro Se QDRO fee is $625 for each QDRO requested, and includes our free Plan Pre-Approval Service, if requested.
How can I personally contact PAC? For additional forms or more information, call 1-800-288-3675 or email PAC at email@example.com
STOCK MARKET GAINS OR LOSSES?
Since Defined Contribution (DC) Plans have an account balance, many divorce practitioners believe that a DC Plan does not need valuation. This may not be so. In fact, failure to valuate can greatly underestimate or overestimate the pension's value. This can seriously impact on a client's equitable distribution. Are your clients concerned about stock market fluctuations? How does a market gain (or loss) impact the DC Plan? Have PAC value these 401(k)'s, Thrift Savings Plans, Employee Stock Option Plans, or other DC Plans using PAC's time-weighted rate of return algorithm.
This highly complex computation can help provide a more accurate picture of value of DC Plans for equitable distribution.