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DIVORCE SUBSEQUENT TO RETIREMENT

LOSS OF SURVIVOR BENEFITS BY FORMER SPOUSE

Consider the following scenario.

Dick retired in 2009. Because Dick was married to Jane at retirement, the automatic retirement option was a Joint and Survivor Annuity. In June of 2011 Dick filed for divorce from Jane.

In the negotiations that followed, Jane is assured by her attorney that the automatic retirement option of a Joint and Survivor Annuity is "irrevocable". This attorney's view is based on assurances received from his non-lawyer "QDRO" expert. Accepting this "experts" advice Jane's attorney is convinced of the irrevocability of Dick's option election. As a result retirement options were not an item negotiated at divorce.

Unanticipated Action.

There is a small but growing trend, especially among Collectively Bargained Plans (Unions) to permit a member to change her or his retirement option upon notification that a divorce has occurred. To accept this option change the retiree is required to provide the Union with the following which demonstrates that no court order exists requiring a Former Spouse to be designated as a Surviving Spouse.

  • Copy of the Final Judgment of Dissolution of Marriage

It will be noted that no attempt was made by Jane's attorney at the time of divorce to assign to Jane a Former Spouse Survivor Annuity. Jane's attorney "was certain" that the option elected at retirement was "irrevocable" and negotiated the settlement based on this view.

Upon receipt by the Union of the Final Judgment of Dissolution of Marriage which clearly did not assign to Jane a Former Spouse Survivor Annuity, the Union changed the retirement option to a Single Life Annuity.[1] Since Jane had no survivor interest the Plan did not notify Jane of this change of option. This change was effective January 1, 2013. On May 1, 2013 Dick died. On May 6, 2013, Jane contacted the Plan to determine when her "irrevocable" Survivor Annuity would begin. She was advised by the Plan of Dick's option change and that as a result of this change no Survivor Annuity was payable to Jane. Jane, then contacted a Pension Valuator, Roger K. Hackenschmitt who advised Jane that the Present Cash Value of her lost Survivor Annuity Benefit was $415,500.00. Two days later Jane instituted a malpractice suit against her former divorce attorney.

Conclusion.

Reliance on a non-lawyer regarding a legal matter is often to the detriment of the family practitioner. Moreover, family practitioners are well advised to consult with a QDRO attorney prior to entering into settlement negotiations. Most experienced QDRO attorneys should have a substantial data base enabling him or her to better advise the family practitioner.



[1] An annuity for the life of the retiree. All payments cease on the death of the retiree. This option provides the retire with the largest monthly pension.