As most family law practitioners are aware, for cases filed after September 1 of 2006, the following legislation applies:
"a proportionate share of all components of the pension, annuity, or retirement benefits shall beincluded in the assignment unless the judgment of divorce or judgment of separate maintenance expressly excludes 1 or more components. Components include, but are not limited to, supplements, subsidies, early retirement benefits, postretirement benefit increases, surviving spouse benefits, and death benefits."
While it's true that this legislation is a definite boon to anyone representing an alternate payee in a divorce action, the opposite could be said of the impact this law has on the attorney for the plan participant. In the past, case law dictated that if language in the JOD didn't expressly state that early retirement subsidies, supplements or survivor benefits would be awarded to the alternate payee, they were not allowed to go into the final QDRO. Of course, this put the burden on the attorney representing the alternate payee to make sure the language in the JOD was sufficient to protect his/her client's interests.
The new statute, by default grants all ancillary benefits to the alternate payee, unless they are expressly excluded by the language in the Judgment. While to some, this may seem the "fair and reasonable" way to award pension benefits, from our perspective as neutral experts, we do not believe this to always be the case.
Take for example a short-term marriage of let's say, 4 years. Husband has been earning pension benefits from his employer for 25 years, of which only the last 4 are marital. The attorney for the participant (who believes the new statute protects him) doesn't have an expert read over the language prepared by the other side. Now that it's time for the QDRO to be prepared. The Judgment language is sparse and simply awards the alternate payee 50% of the marital share of the pension. The preparer has no choice but to include survivor benefits, but to what extent? The statute doesn't specifically state what portion of survivor benefits should be included, simply that they should be part of the QDRO. Some could interpret the statute as implying that because they weren't excluded, the wife of 4 years should receive 100% of the survivor annuity. This of course, would mean a big increase for her in benefits upon the death of the ex-husband. Is it ever a good idea to put into a QDRO an incentive for one party to die? :)
If the language is silent with regard to loan balances in a 401k division, does that mean that they should be included automatically? What about earnings/losses in a 401k award that was meant to offset equity in a piece of real estate. Even though the intention might not be to award earnings, doesn't the statute imply that they should be included even if the Judgment is silent on this issue?
What about disability pension benefits? The new statute seems to indicate that even these are to be included if not specifically excluded. Often times, a disability benefit is paid out prior to normal retirement age and is really meant as income replacement. An award of this benefit to the other side in this respect would be similar to an award of spousal support.
My point is not that things should be tilted to one side or the other in the JOD. My point rather is that attorneys shouldn't expect the statute to do their job for them. It's always best to carefully research the plan you're dividing and think about all the pro's and con's for the particular client you have sitting in front of you today and craft the language carefully. We feel sure that any QDRO expert you work with is more than happy to read your language and offer you some suggestions. For our part, we predict many more cases in the future will be litigated to help unravel a new set of problems created by this QDRO "fix".