Private Pension Plans
Qualified Domestic Relations Order (QDRO)
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Employers that provide pension plans for their employees are governed by a body of federal law commonly known as ERISA. Employers must keep their plans “ERISA Qualified” for tax purposes under the Internal Revenue Code. In order for the marital interest in a pension plan to be divided, a special order called a Qualified Domestic Relations Order (QDRO) must be entered by the court, which must comply with the strict procedures mandated by ERISA and the IRS Code. In Arizona, these pension plans, commonly referred to as defined benefit plans, are provided by such employers as Boeing, Cox Enterprise, Pinnacle West Capital Corporation, Honeywell, Motorola, Salt River Project, UPS, Western Conference of Teamsters, and many more. These pension plans provide for an annuity payment at such time as the employee reaches his or her earliest retirement age or normal retirement.
Your pension attorney must be familiar with a myriad of technicalities under these plans. For example, your pension attorney can divide a pension that allows the non-employee spouse to start receiving his or her portion of the pension at the time the employee spouse reaches his or her earliest retirement age even if the employee spouse does not retire. The non-employee spouse will then receive benefits for the rest of his/her lifetime and there is no need to deal with the “survivor annuity.” On the other hand, if the employee is already retired and receiving benefits, then this method of dividing the pension is not available, and then the issue of a survivor annuity becomes of paramount interest.
It is less commonly known that QDROs can not only be utilized to divide the marital property interest in a pension plan, but a QDRO can also be utilized to collect on a current child support or spousal maintenance obligation. A QDRO can also be used to collect past due child support or spousal maintenance arrearages.
Your QDRO attorney must also be familiar with how to deal with early retirement subsidies, preretirement death benefits (Qualified Preretirement Survivor Annuity), post retirement death benefits (Qualified Joint and Survivor Annuity), and cost of living adjustments. Moreover, the proper formula in order to divide the pension benefit must be of paramount importance. Whenever possible, your QDRO attorney should attempt to obtain your company’s preapproval of the order before it is executed by the parties and the judge. The preapproval process will ensure that when the final QDRO is entered by the court, it will be accepted by the plan administrator.