Did you know that a Court Order is required to divide your former spouse's pension as part of a divorce? Did you also know that it is the responsibility of the non-employee spouse to submit an approved Court Order, typically called a "Qualified Domestic Relations Order" or "QDRO", to the pension plan administrator to receive pension benefits?
Since the passing of the Retirement Equity Act in 1984, QDROs have been the approved method by which a non-employee spouse ("alternate payee") can receive a share of the employee spouse's ("plan participant") pension without violating the the Employee Retirement Income Security Act of 1974 (ERISA). A QDRO is drafted by the attorney for the alternate payee subsequent to a parties' divorce and after the entry of a property division order by the Family Court. The QDRO is signed by the Family Court judge and submitted to the pension plan administrator for processing and approval.
A pension can be the most significant marital asset in a divorce, even more valuable then the former marital residence. Yet sometimes it is forgotten. Under current Delaware law, a former spouse is typically entitled to 50% of the marital portion of the other party's pension. This figure is determined by using the Cooper Formula. If each spouse has a pension, then each will receive 50% of the other spouse's pension.
Upon request, the Family Court will typically award a pre-retirement and post-retirement surviving spouse annuity, which entitles the alternate payee to continue to receive his or her pension benefit for life. Without a surviving spouse annuity, all pension benefits may halt upon the death of the plan participant.
While QDROs are quite commonplace in 2015, I am finding that parties who were divorced in the 1980's and 1990's, when QDROs were still relatively new, may have overlooked this requirement. I have represented many clients who were divorced 25 to 35 years ago and just recently learned there was no QDRO on file while preparing for their retirement.
The good news is that it may not be too late. As long as the plan participant is still living and you have a property division order that entitles you to a portion of your former spouse's pension benefit, a QDRO can be drafted directing a portion of the plan participant's prospective monthly pension benefits to you.
The bad news is that you may not be able to ever recoup some of the benefits lost due to your delay. A plan administrator will not entertain a QDRO that tries to award retroactive benefits. Accordingly, if your former spouse has been collecting pension benefits for years, you may have lost out on thousands of dollars of paid benefits. Moreover, you may have lost your right to a survivorship annuity.
While the Family Court may be willing to entertain a request for recoupment of lost pension benefits upon the filing of a new petition and a hearing, a survivorship election, once made by the retiring plan participant, cannot be changed.
If you are currently going through a divorce and your spouse has a pension or you were previously divorced and awarded a portion of your spouse's pension but you do not have a QDRO in your records, I strongly recommend that you seek the advice of an attorney experienced in drafting QDROs, such as The Yeager Law Firm. Contact us here.