Divorce Tips Database

Autumn Tips

By: Marvin Snyder

  1. BIFURCATION - If the financial aspects, including the pension, of a property settlement are postponed to be determined after the divorce is granted, be sure to maintain the appropriate beneficiary forms to protect the former spouse in case the employee-spouse dies before the pension value is settled. If a “QDRO” is pending, keep the former spouse protected, especially after the divorce becomes final, until the Order is finally and formally qualified.
  2. COAP - The federal government accepts court orders to divide pensions of federal employees as marital property in divorce. There are two federal pension systems: the older Civil Service Retirement System, and the newer Federal Employees Retirement System. Both systems accept proper court orders. The name of such an order is not a “QDRO”; it is a “COAP”, a “Court Order Acceptable for Processing”. This applies to all civilian employees of the federal government, including postal workers.
  3. DISABILITY - In most jurisdictions disability pensions are not marital property. However, as a disability award is usually larger than the pension would be, it may be considered that the pension amount is subsumed by the disability amount. Then the “imbedded” pension may be separated out by an actuary and valued as marital property, leaving the excess provided by the disability award as non- marital. The pension amount would be computed based on pay and service using the regular pension benefit formula. Then this would be compared to the disability pension, in terms of dollar amount as well as time and conditions of payment.
  4. LIFE - If a pension evaluator uses the method of life expectancy in a valuation, ask what the date is on which the employee will die. This one question exposes the problem in using life expectancy as a computational tool. What should be used is a mortality probability table, such as the one used by the Pension Benefit Guaranty Corporation. All pension plans and insurance and annuity contracts are based on mortality tables and probability functions, not on the average number of years of a person's expected lifetime.
  5. PRESENT - What is the ""present"" in present value? In most jurisdictions it is the current date which represents the date of settlement of the marital property. For pensions that means the person's age now and current interest rates. The value of marital property is what it is worth when the case is settled or adjudicated. Be careful to compare and contrast this with the cut-off date for the acquisition of marital property. For example, the pension benefit may be fixed and determined as of the date of marital separation, but its value - what it is worth - is determined now in the realtime present.
  6. QDRO LUMP SUM - If a lump sum is awarded to be payable to a former spouse from a defined contribution plan, by the use of a Qualified Domestic Relations Order or its equivalent, be sure to notify the plan administrator whether or not the funds are to be transferred in whole or in part to the intended recipient's separate IRA account to avoid the 20% income tax withholding that would otherwise be required. Such a transfer must be made directly between trustees and not by a rollover. In a rollover, the funds are paid to the person who then remits the money to an IRA. A payment whether or not there is a rollover is subject to the 20% withholding. Only a direct transfer avoids the withholding.
  7. QDRO DEATH - In a property settlement agreement leading to a QDRO, be extremely careful in the wording of the pension benefits and death benefits to be awarded. If there are to be survivor benefits, specify the percentage or amount separately for two time periods: before and after retirement. Consider in your planning what benefits may be available if the participant dies before he or she retires.
  8. If alive upon retirement specify what options are available or must be elected by court order to provide death benefits after retirement to the former spouse.
  9. “QUALIFIED” - This word has different meanings depending on the rest of the phrase in which it is used. Some examples are:
    • QJ&S - Qualified Joint & Survivor annuity
    • QPSA - Qualified Pre-retirement Survivor Annuity
    • QDRO - Qualified Domestic Relations Order
    • Qualified Plan - A plan approved by IRS under ERISA
    • Qualified Opinion - Less than a fully approved opinion
  10. TERMINATED - There may be pension benefits due to a terminated employee based on former employment or to a person from an old terminated plan. Always inquire about this possibility. Where did he work before, was he covered in any other plan, does he have vested rights in some prior plan? There may be deferred pension benefits available even if a prior employer filed for bankruptcy and terminated the plan with insufficient assets to pay benefits - check in such a case to see of the plan was “rescued” by the Pension Benefit Guaranty Corporation.
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. Our Florida office located in Coral Gables, FL serves Florida family attorneys.
Pension Analysis Consultants, Inc.

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