In some marriages, pension benefits accumulated from one spouse’s employment may constitute the largest source of income for the spouses. Moreover, the pension plan itself may be the largest community asset. There are various situations where the court is called upon to address how the spouses share the future payments from the pension plan as well as the reimbursement to one spouse for pension payments received by the other spouse.
There are many pension plans out there-some belong to private companies and others belong to public entities. Examples of public pension plans are CalPERS, LACERA and FERS. Examples of private pension plans are those that belong to and administered by a private company such as Northrop Grumman. A pension plan is considered community property if the plan participant worked and earned the Plan’s benefits during the marriage. In some cases, in order to divide the plan, the plan has to be joined as a third party in the divorce case.
2. The Qualified Domestic Relations Order
Upon an agreement of how to divide the benefits in the plan, the parties will generally need a Qualified Domestic Relations Order (also called a QDRO) to be filed with the Court AND submitted to the plan administrator. Most family law lawyers are not experts in pension law and thus will not draft the QDRO. Thus, spouses will have to hire a QDRO specialist to prepare the QDRO. The QDRO is crucial because most pension plans will not divide the plan’s benefits without a QDRO. The QDRO generally has to be pre-approved by the Plan before it can be submitted to the Court for signature. Once the pre-approved QDRO has been signed by the parties and the Judge, a court-certified copy of the QDRO should be sent to the Plan Administrator for processing. Assuming the Plan Administrator accepts the QDRO, once the spouse who participates in the Plan retires, the Plan will start making distribution to both spouses based on the specific terms provided in the QDRO. Think of the QDRO as a court order instructing the Plan on how to process the future payments to each spouse. In other words, once the Participant spouse retires, instead of sending him a check for the entirety of his benefits, the Plan is now required to send a portion of that check to the other spouse for her community share of the benefits.
To be continue…
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