If you and your spouse are considering, or are in the process of divorce, and one or both of you has a corporate or civil service pension, know that all pensions are not created equal. This fact is extremely important to understand as you proceed toward an equitable division of your marital estate.
In dividing pension benefits in a divorce, your attorney will be required to create a QDRO document, or Qualified Domestic Relations Order, in order to initiate payment(s) to either or both of you from these plans, depending on your mediated settlement agreement (MSA) and/or divorce decree.
For example, the federal government requires some unique wording to be used in QDROs drafted with regard to civil service pensions. Often, divorce attorneys are not trained in this area, and couples or individuals could end up redoing the QDRO several times to “get it right,” if not completed correctly in the first place. Because of this complexity, there are several areas to consider when drafting the specific wording of a QDRO when civil service pensions are involved in a divorce. Here are some to be aware of:
The following areas of a civil service pension must be addressed separately and specifically in the QDRO document: any Retirement Annuities, lump sum payments, Survivor Annuities and Thrift Savings Plans.
While a corporate pension is normally a stable payment for the lifetime of the individual, a civil service pension has an inflation adjustment tied to the consumer price index. This means the individual with the civil service pension stands to get more money over the long-term.
In one divorce case, the wife, a teacher had earned an annual $50k TRS pension; her husband, an annual $75k civil service pension, based on his years with NASA. The wife was adamant that she receives one-half of his pension and he receives one-half of hers. This way she could participate in the cost-of-living adjustments that were offered by the husband’s plan. She was wise to request this method of handling the division of the pensions, since the TRS pension provides limited cost-of-living adjustments.
In a corporate pension plan, the divorce decree or mediated settlement agreement (MSA) incident to divorce must clearly state the percentage going to the non-employee, and an “as of” date. Civil service rules require much more detail in the decree and MSA, so those two documents and the QDRO must agree on the treatment of the pension at death and other issues.
In instances like those described above, my advice would be to secure the assistance of a Certified Divorce Financial Analyst (CDFA), such as myself, to help in reviewing the QDROs so that specific requirements are met. Better yet, engage a CDFA early in the divorce process so you can start working out the civil service QDRO details before the MSA and/or divorce decree is signed.
Join me at the next Guide to Good Divorce seminar on January 26, 2019, at the Houstonian Hotel, or call me for a consultation at 832-858-0099.