July 2008
Jones v. Treasure: The Importance of making sure a QDRO
can carry-out the intent of a Settlement Agreement
In the recent 4th DCA case of Jones v. Treasure, a QDRO was entered giving the former Wife an interest in the former Husband's American Airlines pension fund. In the original QDRO, a specific dollar amount was awarded to the former Wife along with pre- and post- retirement survivor benefits. The Plan did not allow for a specified dollar amount to be awarded. Instead, they required a specific percentage. This issue was corrected as the monthly dollar amount was converted to a percentage; however, the QDRO awarded survivor benefits that were not agreed to in the Settlement Agreement and a lump sum form of payment, if allowed for by the Plan. The Settlement Agreement simply stated the former Wife was entitled to a monthly dollar benefit for as long as the Wife shall live and did not address survivor benefits or the form of payment, which is usually required by most Plans.
Too many times we get Settlement Agreements in our office that are silent on the issues of survivor benefits, investment gains and/or losses, the valuation date to be used to calculate the awarded benefit and whether or not an Alternate Payee is entitled to additional benefits that may be tied to pension benefits, such as COLAs, early retirement subsidies and/or disability retirement benefits. In order to avoid problems such as in the Jones v. Treasure ruling, it is important to address in the Settlement Agreement all issues and/or benefits tied to certain retirement plans. Rushing through language in order to get a Settlement Agreement signed and relying on the QDRO preparer "to figure out the rest" only delays the process and causes frustration for the clients, as well as increased fees.
The following is a checklist of items to address when you have retirement plans that need to be divided:
Defined Contribution Plans: 401(k)s, Profit Sharing Plans, Savings Plans, etc
1. Will investment gains and/or losses apply to the awarded benefit?
2. What valuation date is going to be used to determine the awarded benefit?
3. How are survivor benefits going to be handled?
4. How are loans, if any, to be handled?
5. Who is going to calculate the "marital portion"? (Note: Most plans will no longer calculate the marital portion!)
Defined Benefit Plans: Pensions, Retirement Plans, Annuity Benefits
1. What valuation date is going to be used to determine the awarded benefit?
2. Are pre- and/or post-retirement survivor benefits going to be awarded?
3. If survivor benefits are being awarded, who is going to pay the cost?
4. Are additional plan benefits, such as COLAs, early retirement
subsidies and/or disability retirement benefits going to be awarded?
5. Can the form of payment be processed by the Plan? (For example, if you are giving a lump sum award based on a present value, does the Plan allow a lump
sum distribution?
All these issues should be addressed in a Settlement Agreement when dividing retirement benefits. Otherwise, your client could lose out on valuable benefits.
Not sure how to word your Settlement Agreements for certain plans? Call our office! We will provide suggested language to those utilizing our QDRO services.
