Don't Panic Over QDRO's
Preparing a QDRO can be demanding for family practice attorneys. But it can be even harder for their clients. A spouse who is happy to see a QDRO awarding him $10,000 from his wife's 401(k) Savings Plan may become unhappy when he realizes he can't actually get the money until his wife turns age 55. And sometimes this realization doesn't even come until years after the divorce (and settlement) are final.
The surprise can be even greater when the QDRO is served on a Defined Benefit Pension Plan, which is far more complicated and difficult to understand than a Savings Plan. This is true even for those of us covered by retirement plans at work who are NOT going through a divorce. Typically, employees don't concern themselves with the rules of their retirement plans until, well, retirement. The divorce and the QDRO add another layer of complexity.
In the recent Pennsylvania case of Gocek [612 A.2d 1004 (Pa. Super 1992)], a mistake was made in the property settlement agreement. Wife was awarded the full spousal annuity provided by husband's government pension. Wife thought this meant she would get half of husband's pension when he retired. But what it really meant was that she would only get an award from the pension when husband died. While he was alive and receiving a pension, wife received nothing.
In Krizovensky [624 A.2d 638 (Pa. Super), the language of the property settlement provided an award the husband felt was not intended. But the court ruled that the language of the settlement was agreed upon by both parties, and if husband (or his attorney) misunderstood the provisions of the agreement, that was their problem. This ended up costing the husband 100% of his pension's survivor benefits.
At the top of this newsletter we said Don't Panic. Then we told you many of the things which could go wrong regarding the pension. So why shouldn't you panic? Because Pension Analysis Consultants exists to support the family practice attorney in valuing pensions, drafting QDROs, and negotiating settlements. Give us a call if you have a question; we hardly ever panic. Except when actuarial tables change.