16.11 Benefit Commencement and Termination

A QDRO needs to specify when benefits start and stop. In an ERISA plan, benefits may start at the participant's earliest retirement date, whether or not the participant has retired. Counsel should be aware that there will be an actuarial reduction for use of the early retirement date for the alternate payee. Benefits may start no later than the date of the participant's actual retirement. Theoretically, a separate interest QDRO could allow the alternate payee to commence benefits after the participant. However, almost all plans require that the alternate payee commence benefits no later than the participant. The QDRO should specify what happens in the case of the death of the participant, before and after retirement. The QDRO should specify what happens in the case of the death of the alternate payee, both before and after the alternate payee's benefits commence. In each case, the death of the alternate payee may be before or after the death of the participant Divorce counsel should take these contingencies into account Note that the answers will depend on whether the plan is an ERISA or non-ERISA plan, a separate interest or shared interest, and the specific agreement between the parties. Key questions include:

1. Before/after retirement, what happens if the participant dies first, before/after he begins receiving his pension benefits?
2. What happens if the alternate payee dies before the participant and before he retires and begins receiving his benefits? Are the alternate payee's benefits forfeited and do the benefits revert back to the participant?
3. If the alternate payee dies first before the participant retires, but she has begun receiving benefits, can she leave her benefits to her beneficiary upon her death?
4. If the participant dies rust, the alternate payee receives benefits, and then dies, can she leave her benefits to her beneficiaries upon her death?

Different pension plans provide different answers to these questions, but divorce counsel should address each of these issues in any QDRO or QDRO-type order.

Reprinted with permission. 2007, Aspen Publishers, Inc., from Valuing Specific Assets in Divorce, edited by Robert D. Feder.

Click here for the next chapter