Pension Survivor Rights Under Qdros: an Issue of Conflict of Laws

• Jurisdiction: California,United States
• Author: George McCauslan
• Publication year: 2017
• Citation: Vol. 39 No. 3

Pension Survivor Rights Under QDROs: An Issue of Conflict of Laws

George McCauslan

George W. McCauslan, FSA, MAAA, FCA, EA, is a consulting actuary who has been assisting family law attorneys with the valuation and division of retirement benefits for 40 years. Although he relocated to Tulsa, Oklahoma in 2012 after 36 years of practice in San Francisco, he continues to provide services to California family law attorneys, addressing issues related to retirement plan assets in dissolution actions. He has been a speaker for family law, actuarial and pension meetings on pension issues.

While it has long been settled law in California that each party in a dissolution action is entitled to one-half of the community interest in all assets, situations exist in which directly dividing an asset is either impossible or impractical. One of the most common of these situations is in connection with the division of the community interest in a defined benefit plan, which provides benefits in the form of a monthly income at retirement. The problem can exist for non-governmental plans that are controlled by the Employee Retirement Income Security Act of 1974 (ERISA), which preempts state law with respect to such pension plans.

In this article, I will address the issues that may arise when dividing benefits from a defined benefit pension plan while the employee is still working. Similar issues that can arise in dividing benefits after retirement were addressed, at least in part, by the appellate court in In re Marriage of Cooper¹.

Whether there is a conflict depends on how any particular defied benefit plan chooses to implement Qualified Domestic Relations Orders ("QDROs"). Usually, an order dividing these pension benefits prior to retirement follows what is termed a "separate interest." The basic concept for such order is that the former spouse receives benefits based on the former spouse's lifetime without regard to how long the employee lives. However, there are two versions of a "separate interest QDRO."

In the first form of separate interest QDRO, which I think of as a "true" separate interest, once the order is in place, the former spouse has a right to a monthly income, actuarially adjusted to be payable for his or her lifetime. These payments are independent of whether the employee spouse lives or dies. This form of order does not require that the former spouse be treated as a surviving spouse to secure payments after the employee's death. This form of QDRO effectively treats the former spouse as it would treat any unmarried employee who is participating in the plan, and nothing would be payable after the...