You can depend on the vast knowledge you received from your CFL Designation for Divorce Practitioners to help you handle all kinds of financial situations in divorce settlements. That includes the nuances of Qualified Domestic Relations Orders (QDROs). These court orders grant one party the right to part of the benefits a former spouse has earned from an employer-sponsored retirement plan.
In the case of Thomson v. Thomson, the Alaska Supreme Court decided the issue of whether a former husband could have his ex-wife’s share of his retirement benefits via a QDRO based on his salary at the time of the divorce rather than at retirement.
The Thomsons divorced in 2006, when they both agreed to divide the “marital portion” of the ex-husband’s actual retirement benefits through a QDRO. The ex-wife, Marjorie, would get 46.96 percent of the total monthly benefits. The couple both had State of Alaska Public Employees’ Retirement System (PERS) accounts.
When they separated, David Thomson still worked for the State and had accrued a little more than 20 years of PERS service credit.
The third-party company that calculated David’s benefits if he retired in 2015 based them on his PERS service between the 1982 marriage and the separation in December 2004. David’s defined benefit plan allowed for a fixed periodic payout based on his years of work and his highest average monthly salary at retirement.
In 2014, David received an updated retirement benefit projection that calculated his ex-wife’s share using his salary at retirement instead of at divorce. The calculations used David’s average earnings for his final three years of employment, 2013 to 2015. Because of his increased salary and years of work, his retirement benefit was projected to be nearly 80 percent higher than the 2006 estimate.
Under the QDRO, Marjorie would now get “nearly double” the benefits. The state Division of Retirement and Benefits (DRB) reportedly responded that David might need to change the QDRO to have Marjorie’s payment calculated using his 2003 to 2005 salary years.
David motioned that his benefit should be based on the earlier data because it would “conform [it] to the parties’ property settlement and effectuate the agreed distribution” of his PERS benefits. According to him, the settlement language and QDRO showed that Marjorie’s payment should be based on the 2006 figures “so that her share would be limited to the ‘marital portion’ of his account.”
Marjorie countered that “Absent clear language to the contrary in a property division agreement, a court should base the division of retirement benefits on the employee spouse’s high-three salary years at the time of retirement.”
Alaska Supreme Court Ruling
The Alaska Supreme Court upheld the superior court ruling that noted “no language in the QDRO or in the property agreement…requires a different conclusion” establishing the use of the 2003 to 2005 salary, therefore, Marjorie’s benefit share must be based on David’s average earnings at retirement.
Our CFL™ Designation will teach you the ins and outs of these and other financial matters in property settlement agreements. Get our free information packet today!
Justia Law. (2019). Thomson v. Thomson. [online] Available at: https://law.justia.com/cases/alaska/supreme-court/2017/s-16155.html [Accessed 28 Mar. 2019].