F.S. [section]185.25 provides: For any municipality, chapter plan, local law municipality, or local law plan under this chapter, the pensions, annuities, or any other benefits accrued or accruing to any person under any municipality, chapter, plan, local law municipality, or local law plan under the provisions of this chapter and the accumulated contributions and the cash securities in the funds created under this chapter are exempt from any state, county, or municipal tax of the state, and shall not be subject to execution or attachment or to any legal process whatsoever and shall be unassignable.
Florida courts have interpreted [section]185.25 as prohibiting the division of any municipal pension through a qualified domestic relations order (QDRO), and have held that a non-participant spouse's only remedy for enforcing an assignment of a pension benefit is a court order requiring the participant spouse to make direct payments. (1) Courts in Florida have upheld this view as an adequate remedy for the former spouse, despite recognizing the obvious enforcement and contempt issues. (2) This article considers the complications and inequities of the current state of the law in Florida related to inability of nonparticipant spouses to obtain enforcement via QDRO or similar order.
The Employee Retirement Income Security Act of 1974 (3) (ERISA) was created in part to protect the interests of plan participants by, among other things, establishing that benefits provided under a covered retirement plan could not be alienated or assigned. This is to say, ERISA was created, in part, to minimize the ability of plan administrators and plan participants, as well as their creditors, to access assets in ERISA-based retirement plans. This is commonly referred to as the "anti-alienation rule." Many other pension statutes contain such provisions as well. In the context of family law cases, an exception to ERISA's anti-alienation rule permits benefits to be assigned via a QDRO. (4)
A QDRO is a court order that enforces an alternate payee's (5) right to receive all or a portion of a plan participant's benefits under an ERISA-based retirement plan. (6) As a practical matter, a QDRO resolves a number of complicated tax, enforcement, and assignment issues because it links an alternate payee directly to the participant's retirement plan. More specifically, it gives a nonparticipant spouse a means to enforce rights to support and/or property division against a retirement plan directly, without having to rely on the participation of the participant spouse in collecting said assignment. In practice, a QDRO makes the process of dividing benefits seamless and reduces litigation in the already contentious world of family law.
Generally, government pension plans are exempt from ERISA; thus, a government pension plan cannot be ordered to accept a QDRO (a creature of ERISA), unless they voluntarily accept orders similar thereto. This means that a government plan will not make direct payment to the former spouse of a plan participant unless they opt to do so by creating their own QDRO-like order. (7) If a retirement plan will not accept such orders, which is the case with Florida's municipal pension plans, a former spouse will have a potentially unenforceable interest in their former spouse/plan participant's pension, along with a number of other problems.
Issues Related to the Divisibility of Municipal Pension Plans
Although municipal pension plans are less common, general retirement plans are the most common assets addressed in family law. In fact, retirement assets actually have their own specific section of F.S. Ch. 61, addressing how they are to be valued and divided in family law cases. (8) In equitably distributing defined benefit retirement plans (commonly referred to as traditional pension plans), the parties typically have the option to either divide such plans (in which case there are several options for doing so) or to value the plans and offset them against other assets.
The latter option is known as the immediate offset method. (9) A "present value calculation"...