Divorce Law 101 – Retirement Benefits Court Orders and Qualifying Domestic Relations Orders
Recently a friend of a friend called with a question about her husband’s federal pension and Thrift Savings Plan accounts. The couple had just finished signing a separation agreement that gave the wife a portion of both her husband’s pension and the TSP. The wife’s lawyer approved the language of the agreement drafted by the husband’s lawyer. Apparently that was it. The agreement did not refer to a retirement benefits court order, which is necessary to effect the transfer of the wife’s interest in both accounts. Neither lawyer said anything about how to implement this transfer. In fact, court orders are the only way to make transfers in the context of a divorce of spousal interests in federal government and ERISA pension plan rights and TSPs. Apparently, it was only by talking with our mutual friend, a government lawyer, that the wife learned what needed to happen for her to get what the couple had agreed on.
One of the many benefits of working at a firm with knowledgeable, experienced, and helpful colleagues is that there is little new under the sun. In a firm whose lawyers have done hundreds of separation agreements, there is model language to start from to write nearly any kind of provision into a separation agreement. At KSF, we can also access our extensive library of agreements – including, because this is the DC metro area, many dividing federal employee pension plans – to use as check lists in drafting or reviewing an agreement that someone else has drafted.
With regard to the “separating parties” issue above, an agreement providing for the division of a pension plan typically includes language that the attorney for the non-employee spouse who is receiving a portion of a retirement account will draft the court order, and the employee spouse will cooperate fully in obtaining the information the lawyer needs regarding the plan. It might also provide explicitly that the order will be submitted to the court on the day of the divorce, so the judge can issue it along with the judgment of divorce.
I write this for a couple of reasons. First, clients should be aware that the division of retirement accounts – government, IRAs and 401Ks – in the context of a divorce often requires a court order conforming to the requirements of the particular plan. For private sector plans qualified under ERISA, the order is typically known as a Qualifying Domestic Relations Order (QDRO – “quadro”). For the transfer of interests in federal government retirement plans (FERS, CSRS, TSP), the order is typically known as a Court Order Acceptable for Processing (COAP). The order directs the relevant plan administrator to do the transfer, and it ensures that there will be no taxes or penalties if the spouse’s share is rolled over into another qualified retirement account.
Second, for me and other lawyers, this is basic divorce law. We need to be reminded to use templates, models, check lists, and experienced colleagues to make sure that basics don’t fall through the cracks.