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Florida Retirement System (DROP) - Divorce Basics Part IIIDROP – DIVORCE – NEGOTIATIONS

PART III

The prior two parts of the DROP discussion presumed settlements in compliance with Boyett (703 So. 2d 451). Increasingly Florida settlements involving the pensions provided by the Florida Retirement System (FRS) have not been consistent with Boyett. This article discusses the significance of what is termed an "anti-Boyett" settlement formula, i.e. contrary to the defined benefit allocation formula endorsed in Boyett.

The Boyett decision called for an award to the Former Spouse of a finite monthly benefit (specific dollar amount) generally calculated as of the Date the Dissolution Action was Filed. This calculation date is termed "Referencing Benefit Date". [1]

To make clear the difference in the size of the awarded monthly benefit to the Former Spouse between a Boyett Formula allocation and an "anti-Boyett" formula allocation the following is offered.

Boyett Formula for the allocation of pension benefits incident to divorce.

Step I. [2]

Compute the employee's monthly accrued benefit as of the date the action for Dissolution was Filed (Referencing Benefit).

Step II.

Multiply the Step I Benefit by a Fraction.

Numerator: total years and fraction of year employee is married and accruing benefits up to the agreed Referencing Benefit Date.

Denominator: total years of service employee accumulated up to agreed End of Marriage Date.

The product of multiplying the Step I, benefit by the Step II fraction is the marital part of the employee's monthly retirement benefit.

Step III.

Multiply the Step II product by the percent of award to the Former Spouse.[3]

Anti-Boyett Formula for the allocation of pension benefits incident to divorce.

Step I.

Compute the employee's monthly accrued benefit as of the date the employee retires or enters the DROP.

Step II.

Multiply the Step I Benefit by a Fraction.

Numerator: total years and fraction of year employee is married and accruing benefits up to the agreed End of Marriage Date.

Denominator: total years of service employee accumulated up to the date of Retirement or enters the DROP.

The product of multiplying the Step I, benefit by the Step II fraction is the marital part of the employee's monthly retirement benefit.

Step III.

Multiply the Step II product by the percent of award to the Former Spouse.[4]

Our Focus.

This article is focused on DROP. Only the impact of an anti-Boyett formula on the DROP is discussed. Not discussed in this article is the impact of an anti-Boyett settlement on the size of the monthly retirement benefit awarded to the Former Spouse.

See Appendix A, for the Statistical Basis for the Calculations that Follow.

Significance of Non-Recognition of Boyett and the preparation of an Anti-Boyett Marital Settlement Agreement.

Magnitude of Gain to Former Spouse Resulting from Anti-Boyett Formula.

Regular Class Employee's DROP Increase to Former Spouse: 42.40%

Special Risk Class Employee's DROP Increase to Former Spouse: 16.00%

The magnitude of the loss to the retiree spouse as a result of an Anti-Boyett Marital Settlement Agreement is always a variable that is determined by the rate of salary progression of the employee from the date of divorce up to her or his retirement. The greater the rate of pay increases to the employee the greater the DROP percentage of increase that will accrue to the Former Spouse and the greater the loss to the retiree.

Amount of Increase to Former Spouse is a Variable.

The percentage of gain by the Former Spouse is also impacted by:

  • The length of time between divorce and retirement. The longer the span between these two dates the greater the loss to the retiree and the greater the gain by the Former Spouse.
  • The rate of salary increases. The more successful the employee the greater the adverse impact of an Anti-Boyett to this employee and the greater the benefit to the Former Spouse.

There is no single algorithm that enables a generalized measurement of this advantage to disadvantage ratio. Each case requires a calculation unique to that fact pattern.

Conclusion.

The Former Spouse is advantaged by an Anti-Boyett formula for the allocation of DROP benefits from FRS. The retiree is disadvantaged by an Anti-Boyett formula for the allocation of DROP benefits from FRS. Attorneys for the Employee Spouse will avoid any deviation from the Boyett Allocation Formula. Attorneys for the Non-Employee Spouse will embrace deviation from the Boyett Allocation Formula.

APPENDIX "A" [5]

Regular Special

Class Class

Date of Birth 7/1/1963 7/1/1972

Date of Marriage 7/1/1990 7/1/1994

Date of Hire 7/1/1988 7/1/1995

Date Action Commenced (EOMD) 7/1/2013 7/1/2013

Valuation Date 7/1/2014 7/1/2014

Valuation Date Age 51.00 42.00

Life Exp @ VD 30.5 45.2

NRD@ EOMD 7/1/2023 7/1/2020

Coverture Fraction (CF) 92% 100%

Numerator 23 18

Denominator 25 18

Normal Retirement Age (NRA) 60 48 [6]

Time to NRA 9.00 6.00

Time from NRA 21.50 39.20

Final Avg. Pay (at EOMD) $65,000.00 $78,000.00

Total Yrs. at NRA 35 25

Mo. Benefit at EOMD $2,166.67 $3,510.00

Marital Monthly Benefit $1,993.33 $3,510.00

To Former Spouse $996.67 $1,755.00

At Normal Retirement Age (NRA)

FAP at NRA (1.5% cola) $92,562.71 $90,474.47

CF at NRA 65.71% 72.00%

N 23 18

D 35 25

Total Benefit @ NRA $4,319.59 $5,654.65

Marital $2,838.59 $4,071.35

To Former Spouse (FS) $1,419.29 $2,035.68

Worth of FS share at EOMD of DROP $87,937.08 $126,126.98

Percent of Increase to Wife 42.40% 15.99%



[1] In a minority of cases the Referencing Benefit Date is the Date of Divorce.

[2] The benefit computed at Step I, is the Boyett "Referencing Benefit".

[3] In marriages of considerable duration this factor is generally 50%.

[4] In marriages of considerable duration this factor is generally 50%.

[5] Those requiring amplification or clarification of the Appendix, contact Troyan.

[6] For this employee, based on years of credited service. Do not generalize, NRA for Police is fact specific.