Divorce Tips Database

QDRO Complexitie

By:Mark K. Altschuler

Concepts and Pointers

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 New Jersey, the Reinbold decision indicates that early retirement enhancements be included in a QDRO, even if the enhancement is after the date of divorce.

In QDROs that comply with the Employee 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 (cola) adjustments, disability, reversion of benefits, the Former Spouse Survivor Annuity, and in New Jersey, the White Social Security offset. Some valuators mistakenly apply the Pennsylvania Cornbleth Social Security offset in New Jersey. However, PAC is familiar with White, under which case the Social Security earned by the non-employee spouse during the marriage is subtracted from the marital portion of the pension.

Under the Hayden case, a cost living adjustment is included in a marital present value calculation. Both the Civil Service Retirement System (CSRS) and New Jersey Public Employees Retirement System (PERS) have cola. In addition, CSRS employees and New Jersey state troopers do not contribute to Social Security. In these situations, we combine the Hayden and White cases.

The New Jersey Public Systems present another area of challenge. Our familiarity with the NJ Public Employees Retirement System (PERS), as well as the Teachers' System (TPAF), and the Police and Fire System (PFRS) enables us to account for loans, what benefit structures are permissible in PERS Domestic Relations Orders, and issues pertaining to the survivor benefit in PERS DROs. Regarding QDROs in general, PAC is available to consult with counsel on the application of the Risoldi case, what the marital portion is under Risoldi, and how this applies to QDROs and non- ERISA DROs in New Jersey. New Jersey is unique in that the Hayden case bases the marital portion on the benefit earned as of the cutoff date for purpose of immediate offset, while the Risoldi case indicates that the benefit at retirement, multiplied by the coverture fraction, should be used in deferred distribution. Because of this dichotomy, we see many property settlement agreements awarding the former spouse a portion of the benefit accrued as of the date of complaint, while in fact the former spouse is entitled to a portion of the entire benefit at retirement, under Risoldi.

In QDROs for Defined Contribution (DC) plans, many plans, such as Lucent, AT&T, Honeywell, and General Electric, 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. Under Bobrowski, passive earnings from date of complaint until date of distribution are marital property. Our 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 Plans (SERP), PAC has developed a method for obtaining payment in most cases, using an if-as-when Domestic Relations Order combined with a valuation. QDRO a can be confusing, frustrating things to deal with. PAC has produced literally thousands of draft QDROs over the past ten years. PAC's solid experience and proven expertise can create a draft QDRO or adapt a model order for your particular client's plan, engineered to your cases's particular needs. For your QDRO drafting needs, you may wish to consider the Pension Analysis Consultants at PAC.

What about cost? Isn't this expensive? Cost is always very important to the client. PAC charges only $400 for a draft QDRO. With discounts for concurrent additional QDROs, a second QDRO for the same party is only $300; and a third, $275. These rates are all the more reasonable, considering there is no extra charge for plan revisions. All revisions generated by the plan for a period of up to three years after the initial draft QDRO are free of charge!

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. For additional forms or more information, call 1-800-288-3675 or visit PAC's website at www.pensionanalysis.com.


The New Jersey PERS, unlike ERISA plans, does not issue a statement of accrued benefit. This must be calculated by the valuator using the PERS formula, service, and average base pay. With PAC, the actuary who performs the calculations is the actuary who signs the report, can answer any questions and testify if need be. Firms with an unsigned report often utilize a clerk for performing the valuation, while you can always get in touch with the PAC actuary who signed the report.

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.

Contact Us For Specific Information About Your Case:

P.O. BOX 7107
Elkins Park, PA 19027

Phone: (215) 782-9845

(800) 288-3675

Fax: (215) 782-9852

Mark K. Altschuler President

ASPPA Member

Email Us

We Value The Future. ®

BBB A+ rating. ®