Qualified Domestic Relations Orders and Pension Evaluations
Pension Evaluations Qualified Domestic Relations Orders QDRO's QDRO Tutorial Pension Evaluation Contact Us

Name:
Email:
Phone:
--
Message:
Make a Payment
We support Apraxia-KIDS

ATTORNEY NEGOTIATING AND DRAFTING GUIDANCE

FLORIDA – DROP – DIVORCE

At the end of 2013 the Florida Retirement System's (FRS) Deferred Retirement Option Plan (DROP) had 38,724 participants. This statistic will vary over time. What is certain is that many currently divorcing participants of the FRS will upon attaining eligibility enter the DROP.

Because of this potential for an FRS employee to enter DROP post-divorce, it becomes the task of the family practitioner to understand how divorce can impact on her or his client's pension benefits attributable to DROP participation.

Caution.

At the time of divorce neither spouse may be mindful of the significance of DROP. What is certain is that the post-divorce entry of the employee into DROP will be of financial importance to both spouses. It is unwise to presume that failure to award a Former Spouse a portion of any future DROP operates as a bar to a Former Spouse's participation in DROP.

Query.

Does failure to assign to a Former Spouse in the Marital Settlement Agreement operate as a bar to this Former Spouse's participation in DROP? Consider the following Illustration.

FRS Employee Listajo Pacaro

Former Spouse Jane Pacaro

Basic Statistics for Listajo

Date of Birth 8/1/1966

Date of Marriage 8/1/1996

Date of Hire 8/1/1991

Date Action Commenced 8/1/2014

Valuation Date 8/1/2014

Valuation Date Age 48.00

YOS at EOMD * 23

Marital YOS 18

AFC ** $75,000.00

*End of Marriage Date

**Average Final Compensation

Mo. Benefit at EOMD $2,300.00

(1.6% * 23 YOS * $75,000.00) = $2,300.00

Coverture Fraction (18 ÷ 23) 78.26%

Marital Monthly Benefit $1,800.00

(78.26% * $2,300.00)

To Former Spouse $900.00

(Half of Marital)

The Marital Settlement Agreement.

Based on these statistics, Jane Pacaro is awarded a "Boyett" monthly benefit of $900.00. A QDRO is filed with the FRS indicating Jane's monthly award of $900.00, payable upon the retirement of Listajo. Jane joyfully awaits Listajo's "retirement" and the receipt of her portion of the retirement benefit.

Clarification.

An FRS employee may retire after 30 YOS regardless of her or his age. Thus Listajo could retire on August 1, 2021 at age 55. Instead, Listajo enters the DROP and remains in the DROP for five years.

Subsequent to Divorce.

Listajo's actual monthly benefit upon entering the DROP is $3,320.00. [1]

Based on the Divorce Listajo's Expectancy.

Mo. Pension Jane Listajo

$3,320.00 $900.00 $2,420.00

$3,386.40 [2] $900.00 $2,486.40

$3,454.13 $900.00 $2,554.13

$3,523.21 $900.00 $2,623.21

$3,593.67 $900.00 $2,693.67

Based on the FRS interpretation of the Marital Settlement Agreement.

Mo. Pension Jane Listajo Loss to Listajo

$3,320.00 $900.00 $2,420.00 $0.00

$3,386.40 $918.00 $2,468.40 $18.00

$3,454.13 $936.36 $2,517.77 $36.36

$3,523.21 $955.09 $2,568.12 $55.09

$3,593.67 $974.19 $2,619.49 $74.18

ADDITIONAL SURPRISE FOR LISTAJO.

Listajo expects a DROP lump sum distribution from his DROP accumulations in the amount of $225,000.00. Instead he received approximately $168,000.00. The balance of his expectancy is distributed to Jane. Who will Listajo hold accountable for this $57,000.00 "loss"?

Alert:

FLORIDA RETIREMENT SYSTEM WILL AWARD THE FORMER SPOUSE HER PROPORTIONATE SHARE OF THE DROP UNLESS A QDRO SPECIFICALLY BARS SUCH PARTICIPATION.

Florida Retirement System's interpretation of a "Boyett" award to a Former Spouse.

  • The Former Spouse's monthly benefit will be DROP adjusted for COLA at the same rate as the FRS employee's.
  • A monthly sum equal to the COLA adjusted benefit of the Former Spouse is deposited into the DROP for the benefit of the Former Spouse

Listajo's Reaction.

At the time of divorce Listajo's attorney did not mention DROP or in any manner alert Listajo to how his entry into DROP would affect his retirement benefits. Has Listajo's attorney failed to properly inform his client of the possible ramifications of the Marital Settlement Agreement?

Conclusion.

Attorney's representing FRS employee's may wish to alert their clients (in writing) to the significance of DROP entry even though it is not contemplated at the time of divorce. Absent a waiver by the Former Spouse of DROP COLA and a Lump Sum Distribution from DROP, this Former Spouse has a DROP interest.



[1] Based on AFC of $83,000.00 and 30 YOS.

[2] These values are COLA adjusted.