QDRO Forms to Divide Pension Advantages in Divorce – “Shared Interest” Or “Separate Interest” Approach

A lot of folks facing the prospect of divorce are surprised to discover that pension Advantages accrued throughout the course of a marriage are regarded as marital property (or, in some states including California, community property) that is divided between the spouses upon divorce. A pension plan falls under the category of retirement plans recognized as defined benefit plans. These kinds of retirement plans usually offer that upon retirement, the participant (employee) is entitled to a monthly annuity that is payable over his or her lifetime.

Due to the fact of particular provisions contained a Federal law recognized as the Employment Retirement Security Act, a divorce judgment or matrimonial settlement agreement, standing alone, is not a legally sufficient mechanism for dividing a pension plan. It is necessary that a further order, recognized as a qualified domestic relations order (QDRO) be entered by the court and approved by the pension plan administrator.

In situations where the participant spouse is not yet retired, the QDRO form can utilize two unique approaches for dividing pension Advantages. These contain the “shared interest approach” and “separate interest approach.”

If a QDRO form uses the Shared Interest Approach, payments to the Alternate Payee can not start until the Participant chooses to retire and begins to obtain a retirement allowance. Furthermore, payments to the Alternate Payee have to end upon the Participant’s death unless the Alternate Payee was designated in the QDRO as the surviving spouse of the Participant for the purpose of electing a Qualified Joint and Survivor Annuity and such election was elected by the Participant at the time of the Participant’s retirement.

If a QDRO form applies the Separate Interest Approach, a “separate interest” is carved out for the Alternate Payee and adjusted to his or her actuarial life expectancy. In addition, the Alternate Payee controls the timing and manner of his or her receipt of the benefit payments. The Alternate Payee can commence receiving Advantages at the Participant’s earliest retirement date, rather than wait for the Participant to start to obtain a retirement allowance.

In most instances, it is extremely beneficial for the non-participant spouse that the QDRO form utilize a separate interest approach. Sample QDRO forms are out there for download. Upon completion of a proposed QDRO form, the document should be submitted to the pension plan administrator for approval, and, thereafter, to the divorce court adjudicating the matter.

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