If you have divorced or are divorcing, it’s important that you read the information in this section of the CMERS website.
The following information and forms are designed to assist members, alternate payees, and legal representatives when retirement benefits are being considered for possible division in divorce proceedings. Much of the information provided is based on the express statutory language and requirements imposed upon the CMERS retirement system by State statute. Under state law, CMERS benefits may not be paid to anyone other than the member except to an alternate payee pursuant to a valid plan approved domestic relations order commonly referred to as a “PADRO.” Unless there is a PADRO, CMERS will only pay retirement benefits, or a contribution refund to the member and death benefits to the member’s named beneficiary.
In an award of retirement benefits in a Marital Settlement Agreement or Dissolution of Marriage, the CMERS member’s former spouse (Alternate Payee) is eligible to receive a portion of the member’s retirement benefit. However, before an Alternate Payee can receive a benefit, a PADRO must be approved by the CMERS. This section of the website offers information intended to provide assistance in obtaining an approved PADRO in a timely manner, a description of the payment process, contact information, and model generic judicial orders for use under CMERS.
Dividing benefits is a legal issue and many use the services of lawyers. Whether you obtain legal counsel or prepare the documents yourself, all of the legal requirements involving your benefits must be resolved before anything can be paid. It is strongly recommended that individuals obtain competent legal and /or other expert assistance. This information is provided with the understanding that CMERS is not rendering legal, financial, or other professional advice. CMERS does not assume responsibility for the specific consequences resulting from application of this information.
Because of the unique provisions of the law governing CMERS, we recommend that all the parties’ attorneys review the guidelines on this website and obtain the model PADRO form. This will allow all parties to be fully aware of the plan provisions affecting pre and post retirement benefits, avoid unnecessary time and expense and insure administrative approval of the order by CMERS.
Procedures And Guidelines For Determining Qualified Status Of A Domestic Relations Order
The Connecticut Municipal Employees Retirement System (CMERS) is a governmental retirement plan and, as such, is exempt under United States Code, Title 29, Section 1003 from the federal requirements of the Employee Retirement Income Security Act (ERISA) and the Retirement Equity Act as they pertain to a Qualified Domestic Relations Order (“QDRO”). A QDRO is a domestic relations order (DRO) that provides for payment of benefits from a qualified plan to a spouse, former spouse, child or other dependent of a plan member and that meets certain requirements.
As noted, CMERS, as a governmental plan is not governed by ERISA. However, the Retirement Act does provide for the division of pension benefits when it is so ordered by a court of competent jurisdiction in recognition of marital asserts or child support obligations, providing such order is not contrary to CMERS plan provisions. This plan approved domestic relations order, referred to as a “PADRO” in these guidelines for ease of reference, is a court order (DRO) that meets the conditions specified by state law and by CMERS. Additionally, Conn. Gen. Stat. Sec. 52-321a allows a “QDRO” to be ordered by a court upon petition by the State to recover the costs of incarceration of a plan member or beneficiary or upon the petition of a victim of a crime committed by a member to recover damages awarded by a court of competent jurisdiction. A CMERS PADRO is a deemed qualified domestic relations order for purposes of Sec. 52-321a and for federal tax purposes.
The Retirement Commission is responsible for the proper administration of CMERS; therefore, it is imperative that the court, the attorneys, and the parties become familiar with the Commission’s requirements and some important CMERS plan provisions before executing a pension division order. A copy of the summary plan description for CMERS is available on the Connecticut State Comptroller website by clicking here. A modifiable version of the Model PADRO may be downloaded from the same web site.
The role of the Commission and of the Retirement and Benefit Services Division in approving PADROs is simply to determine whether the PADRO satisfies the requirements under the Internal Revenue Code and under the Plan. The Division’s pre-approval or final approval of the PADRO relates solely to whether the technical requirements for PADROs were satisfied. Whether or not the PADRO is at a stage where the parties should agree to its terms or whether the terms are “fair” to the parties is not a determination for the Commission, the Division or CMERS to make. Neither the Commission nor the Division nor CMERS are, or can be, involved in any negotiations between the parties as to the division of retirement plan benefits or can (or will) give legal or actuarial advice with regard to the terms of the PADRO or the value of the benefit being discussed.
II. BASIC PROCEDURAL STEPS FOR PADRO PREPARATION
- CMERS does not write PADROs. CMERS reviews draft PADROS to determine if they can be administered.
- The drafter of the PADRO should find out everything he or she can about the member and his/her benefits. CMER members are not state employees: drafters of the PADROs usually need to contact the member’s employing municipality or agency for this information.
- The drafter needs to draw up the DRO in accordance with the steps outlined in these guidelines and in conformance with the Model PADRO provided. CMERS is not governed by ERISA: language relating to ERISA plans should not be used. It goes without saying, both the Participant and the Alternate Payee should agree on its provisions before it is drafted.
- When the court approval is obtained, one of the parties must obtain a court certified copy of the court order. This copy should be sent, preferably by certified mail, to CMERS for approval as a PADRO.
- When CMERS accepts the DRO as a PADRO, it sends out a notice to the parties. Both the participant and the alternate payee (and their attorneys) should keep a copy of both the PADRO and the notice.
- What happens if CMERS doesn’t approve it at this end stage? CMERS will send you a notice which will include the reasons for the rejection including if applicable, a description of any additional material, information, or modifications necessary for the order to be a PADRO and an explanation of why such material, information, or modifications are necessary. For example, the rejected order may contain a provision for a lump sum distribution of benefits which is not an option offered by CMERS. At that time, the drafter will need to return to Step 3 and start the entire process over again. It is important to note that CMERS can, and will, reject even a court approved order if it does not conform to plan provisions.
- Plan accordingly: it can take 4-6 months for DRO approval by CMERS.
- Three things to keep in mind:
- A PADRO should not be confused with an alimony award; it is viewed more of a marital asset as opposed to spousal support.
- A PADRO is not always necessary in situations of divorce. If the parties can agree to divide other marital property equitably, then CMERS benefits may not need to be divided, and there may not be a need for a PADRO.
- A CMERS PADRO must be a final judgment, decree, or order that has been qualified by CMERS. If an order has not been signed by a duly appointed judicial official and filed in accordance with applicable laws and procedures, the order may be a domestic relations order, but it is not a CMERS PADRO and it will not be enforced.
III. GLOSSARY OF COMMON TERMS AND DEFINITIONS
For purposes of applying the procedures outlined herein, the following definitions shall be controlling, unless otherwise stated herein:
|Accrued Benefit||An accrued benefit is the amount of retirement benefit that a member has earned as of a particular date in a defined benefit plan. It is calculated according to the benefit formula in the plan. When preparing a PADRO for CMERS, the drafter should make sure the accrued benefit is determined as of a certain date (date of divorce, date of retirement, etc), whether it will include future contingent benefits (e.g. cost of living adjustments, early retirement “handshakes”, etc). and the effect of retirement payment options upon the accrued benefit.|
|Alternate Payee||An alternate payee (“AP”) is defined as an individual who is both entitled under Connecticut law and is recognized by a domestic relations order as having a right to receive all, or a portion of, the benefits payable under a plan with respect to the member. Basically, this is the party that receives the benefit.|
|Benefits (Generally)||In order to decide how to divide benefits under a PADRO, the drafter first should determine the types of benefits the plan provides. CMERS plans provide: Retirement benefits that are paid during the member’s life and; Survivor benefits that are paid to contingent annuitants after the member’s death. Refund of contribution(s). Generally, a PADRO can assign all or a portion of each of these types of benefits to an alternate payee. The drafters of a PADRO should coordinate the assignment of these types of benefits.|
|Benefit Payment Options||At retirement, the member will have several payment options available to him or her such as straight life, 50% spouse, 10 year certain, etc. These options are outlined in the CMERS’ SPD as well as in the relevant statutes. The payment option should be chosen with care because it affects the amount of the member’s monthly payment and it cannot be changed after retirement benefits commence. For example, a straight life annuity generally provides a member with the highest monthly benefit but all payments stop at the death of the member while a 10 year certain may provide a smaller monthly amount but may provide a benefit beyond the member’s death.|
|Contingent Annuitant||“Contingent annuitant” is, in essence, the person named by the member to receive payments following his or her death. A Contingent Annuitant can only be named if the option selected provides for annuity payments to a second person. For example, there can be no “contingent annuitant” if the straight life payment option is chosen. For some options, the Contingent Annuitant must be the spouse or spousal consent must be obtained to name someone other than the spouse.|
|Contributions||CMERS is a defined benefit plan. As such, it is funded on an actuarial basis; there are no municipal contributions individually assigned to an employee’s account. Municipal contributions are never available to the member or to an alternate payee for distribution. However, CMERS employees generally contribute a percentage of their salary to the Plan. For these employees only, in the event of their termination of employment or death prior to retirement, the employee contribution account may be available for distribution.|
|Defined Benefit Plans||A defined benefit plan provides fixed or “definitely determinable” benefits, established by formula, set in advance, and by actuarial cost methods. The basic retirement benefits are generally expressed in the form of periodic payments for the member’s life beginning at the member’s retirement. This stream of periodic payments is generally known as an “annuity.” There are special rules that apply if the member is married – for example – benefits may be paid in the form of a qualified joint and survivor annuity rather than a simple life annuity and spousal waivers are required in some cases.|
|Disability Retirement||Active participants who become disabled may be eligible for disability retirement benefits. Notwithstanding any provision to the contrary, PADROS will be applicable to disability retirements. Drafters should be aware that a disability retirement benefit will be coordinated with other sources of income such as Social Security benefits and Workers’ Compensation benefits. CMERS has a provision where CMERS benefits may be reduced upon receipt of a Social Security Disability Award or at age 62 whichever comes first.|
|Domestic Relations Order (DRO)||A “domestic relations order” (DRO) is any judgment, decree, or order (including approval of a property settlement agreement) that provides an individual with all or a portion of, the benefits payable under a plan with respect to a Plan member and is made pursuant to a State domestic relations law or, in the case of State of Connecticut pension and retirement benefits, in accordance with Conn. Stat. Sec. 52-321a. It is important to note that there can be no DRO until there is a finalized, executed judgment, decree or separation agreement that is approved and signed by the court.|
|Member (or Participant)||The “member” is the individual whose benefits under the plan are being divided by the PADRO. The member’s spouse (or former spouse, child, or other dependent) who receives some or all of the plan’s benefits with respect to the member under the terms of the PADRO is the “alternate payee.” As different rules may apply, it is important to determine whether the member is an active member in the plan, a terminated member, or is retired and is receiving retirement benefits (e.g. on “pay status”).|
|Pay Status||The member has retired or otherwise left employment and is actually receiving retirement benefits.|
|Plan Approved Qualified Domestic Relations Order||A “PADRO” (plan approved domestic relations order) is a court order (DRO) that meets all conditions specified by state law and CMERS provisions. A “PADRO” is a court order approved by CMERS establishing the manner in which the retirement benefit of a CMERS member and the alternate payee (usually the former spouse) should be divided when the benefit becomes payable.|
|Shared Payment Approach||The AP receives payments under this approach only when the member receives payments. In splitting the benefit payments, the PADRO may award the alternate payee either a percentage or a dollar amount of each of the member’s benefit payments; in either case, the amount awarded cannot exceed the amount of each payment to which the member is entitled under the plan. The Shared Payment is the only form of benefit allowable under governmental plans.|
|Spouse and Civil Union Partners||Effective October 1, 2005, civil union partners are also eligible for coverage under the pension benefit plan provisions. To that end, throughout these guidelines the term spouse is intended to mean civil union partner as well as marriage partner whenever it is appropriate. Domestic partnerships are not eligible for coverage under the pension benefit plan provisions.|
|Summary Plan Description||The summary plan description is a document that summarizes the rights and benefits of participants and beneficiaries and the obligations of the plan. Copies of the summary plan description are available on the Connecticut State Comptroller website (CMERS) at osc.ct.gov/retirement/CMERS/munisummary.htm.|
|Tax Issues||The federal income tax treatment of retirement benefits is grounded by federal law, and a PADRO cannot designate who will be liable for the taxes owed when retirement benefits are paid. Generally, payments from the Plan to the alternate payee pursuant to an order shall be includable in the alternate payee’s gross taxable income. Additionally, under current IRS rulings, there may be federal tax consequences in assignment of pension benefits involving civil unions. All parties should consult with their legal and financial advisors about any possible tax issues or consequences as CMERS cannot and will not provide any tax advice.|
IV. IMPORTANT CMERS PLAN DIFFERENCES
The most important difference in drafting a domestic relations order under CMERS is that many IRS provisions relating to the rights of a spouse are not applicable to governmental pension plans. Simply stated, former spouses do not enjoy the same rights or benefits under governmental pension plans as they may under ERISA plans.
The only form of benefit available to an AP under a governmental plan is a “shared payment” benefit. Under CMERS (and unlike ERISA) the alternate payee cannot begin collection of his/her portion of the benefits until the member actually retires. Also, payments to the alternate payee will be made only for the lifetime of the member. If the drafter wishes to provide protection to the alternate payee with regard to the death of the member, the member must choose a benefit payment option which will provide such protection and name that option in the PADRO.
Remember, under CMERS:
- The AP cannot begin receiving a pension distribution until the member actually decides to retire. If the member chooses to work until a later age, the AP must wait until s/he retires to begin collecting benefits. Even if the member could retire at 55, the member can work until age 70 or even later and the AP will not receive any benefit payment or distribution until that time.
- The AP’s portion of the pension has no survivor benefits. If the AP dies prior to the member’s retirement, or any time after the commencement of benefits, the AP’s estate gets nothing. The AP does not have the opportunity to designate a beneficiary.
- A distribution to an AP at the member’s “earliest retirement date” is not possible unless the member applies for and is found eligible for such benefits at his/her “earliest retirement date”. Any court-awarded portion of a member’s monthly retirement benefits can only be paid to an AP when the member applies for and is found eligible to receive such retirement benefits. CMERS will not enforce any provision in a PADRO that attempts to “order” or require the member to retire at a certain age or on a certain date.
- CMERS does not and cannot prepare lump sum present value calculations of accrued retirement benefits. Parties can stipulate to the value or if they feel it necessary, can obtain a present value calculation from an independent expert such as a qualified certified public accountant or an actuary.
- CMERS provides pre and post retirement death benefits to most but not all of its members.
One last consideration: although municipalities may pay its employees on a weekly or bi-weekly basis, retirees are paid on a monthly basis. Drafters and parties should make all calculations and determination on a monthly basis.
V. RETIREMENT BENEFIT PAYMENT METHODS UNDER CMERS
Several choices are available regarding the distribution of retirement allowances. Pensions must be paid in lifetime monthly payments but payments differ depending upon option selection. Health and age at retirement, income from other sources, financial obligations and providing for survivors are some of the factors involved in this decision. If the member elects to have his or her retirement benefits paid to someone else when he or she dies, the recipient is referred to as the “contingent annuitant”.
There are five payment options for CMERS members at retirement and all except the spousal option can be chosen in a PADRO. Members are urged to consider carefully the payment plans available for their election when drafting a PADRO. Once a payment plan or option is selected at retirement, the option can NEVER be changed regardless of any subsequent happenings such as a subsequent divorce or death of a contingent annuitant unless you have chosen the 10 or 20 year payment certain option and the contingent annuitant dies.
The options are summarized as follows:
- Option D – Straight Life Annuity. This option provides the member with the highest monthly benefit for your lifetime. However, all payments stop at the member’s death.
- Option B – 50% or 100% Survivor. This option arranges to continue payments after the member’s death to a contingent annuitant. This contingent annuitant can be any person, including a former spouse. The option provides a reduced monthly benefit to the member for life. After the member’s death, a percentage of that benefit, either 50% or 100%, whichever is chosen, will continue for the lifetime of the contingent annuitant.
- Option C – 10 Year or 20 Year Period Certain. This option provides a reduced monthly benefit to the member for his/her lifetime with payments guaranteed from his/her retirement date for 10 or 20 years (whatever is chosen). If the member should die within 10 years (120 payments) or 20 years (240 payments) from the date of retirement, the remaining payments will be made to the contingent annuitant(s). This is the only option that will allow a new contingent annuitant named if the originally named contingent annuitant should die.
The chart below is an illustration as to how a payment option may influence a member’s monthly benefit. The chart is based on a 62 year old member with a (former) spouse of the same age and an estimated straight life annuity of $1,644 per month. The chart is meant solely to give the PADRO drafter an idea of the actuarial differences in monthly amounts based upon the payment option selected. The contingent annuitant does not have the right or the opportunity to designate a beneficiary.
Estimated Monthly Benefits At Age 62
|Payment Option||Member’s Monthly Income||Beneficiary Income After Member’s Death|
|Straight Life Annuity||$ 1,644||$ 0 (none)|
|100% Contingent Annuitant||1,336||1,336|
|10 Year Period Certain||1,569||1,569 (but only payable for 10 years after retirement)|
|20 Year Period Certain||1,365||1,365 (but only payable for 20 years after retirement)|
If the member remarries after the divorce and implementation of the PADRO and if they have been married to the “new” spouse for at least one year prior to the commencement of the member’s retirement benefits, the member’s option selection (even if clearly stated in the PADRO) must be signed off by the “new” spouse as acknowledgment of receipt of the notice of option selection and of his/her understanding of the consequences of the option chosen.
V. DIVISION OF PAYMENT METHODS UNDER CMERS
Generally, a PADRO can divide a CMERS account between a member and an alternative payee in three basic ways: a “dollar amount method,” the “straight percentage method,” and a “percentage of benefit at date of dissolution.”
1. Dollar Amount Method
Under this method, CMERS is directed to pay a set monthly amount to the Alternate Payee upon the retirement of the member such as $300 of the Member’s gross monthly payment. This is CMERS preferred method.
2. Straight Percentage Method
Under this method, CMERS is directed to pay benefits to the Alternate Payee under a formula such as 25% of the gross monthly benefit payable upon retirement of the member. If a PADRO awards a percentage of the member’s benefit payments (e.g. an award of 25% rather than a set dollar amount), then the alternate payee generally will automatically receive a share of any future increase in the member’s benefits (e.g. a cost of living adjustment). Conversely with a percentage approach, if the member takes an early retirement so that his benefit is actuarially reduced, the AP’s benefit will be correspondingly reduced as well.
3. Percentage of Benefits At Date of Dissolution
Under this method, CMERS is directed to pay a set monthly amount to the Alternate Payee which is determined at the date of dissolution of the marriage. Drafters are encouraged to secure a good faith benefit estimate from the Division concerning this monthly amount prior to submitting the DRO to the Division for its approval.
VI. ISSUES RELEVANT TO THE CMERS DEFINED BENEFIT PLAN
Among the issues and items to be considered by both parties in drafting a PADRO for CMERS’ defined benefit plan are:
- Remember – there are four “income related” issues that need to be addressed (or at least considered) in a CMERS PADRO: (a) the accrued benefit; (b) possible member contributions and distribution thereof in case of death or termination; (c) the benefit payment option and its effect on the accrued benefit and survivorship issues and (d) the effect of the Age 62 Social Security offset. Remember, some CMERS positions are not covered by Social Security and the drafter should check to determine if the member has Social Security coverage.
- The date the accrued benefit is to be determined. The date of the dissolution of the marriage? The date of actual retirement? With regard to the date of retirement note that an early retirement may be possible for the member but at a reduced benefit.
- Should the benefit be computed as a straight dollar amount or as a percentage of the member’s actual retirement payment? Or should a service fraction be used? DO NOT INCLUDE MORE THAN ONE ALTERNATIVE IN YOUR ORDER OR A CHOICE OF ALTERNATIVE DEPENDING ON CIRCUMSTANCES AS IT WILL BE REJECTED.
- Is the CMERS’ member of employment covered by Social Security? What are the member’s contributions? Does the member qualify for retirement benefits at the time of the PADRO?
- Remember, payment to the alternate payee is contingent upon the member actually retiring and receiving a retirement allowance.
- Know the different retirement payment options available to the member and their effect upon the AP if chosen. If the PADRO does not identify the benefit payment option, then CMERS will presume that the member is free to select any available retirement option (e.g. straight life, 10 year certain, etc).
- The method used to derive the accrued benefits – MAKE SURE THAT IT MAKES SENSE FROM THE VIEWPOINT OF THE PLAN’S BENEFIT FORMULA! Additionally, in drafting a PADRO, make sure you consider not only the accrued benefit but benefit payment options at the time of retirement and the effect of early retirement (if available) on the benefit.
- Remember, a PADRO may award to the alternate payee all or part of the member’s basic retirement benefits.
- Remember, it is possible to have future increases in the Participant’s benefits. Basic retirement benefits may increase due to circumstances that occur after a PADRO has been entered, such as increases in salary, crediting of additional years of service, or legislative amendments to CMERS’ provisions.
- Remember, the member’s benefit amount may change at retirement depending on which benefit payment option he chooses – a choice which may have an effect on the expectation of the parties if a percentage of the benefit amount is chosen.
- The effect of the member and the alternate payee’s death on the benefit. Unless the AP has been named as a contingent annuitant, the member’s post-retirement death will stop any benefit payment made to the AP. However, being named as a contingent annuitant may have the effect of ultimately giving the AP additional benefits not originally contemplated by the order. Remember: the CMERS plan does not permit the AP to name a beneficiary. Rather, the CMERS plan provides that on an AP’s death before payment, any undistributed benefit is restored to the member.
- Surviving and/or subsequent spouse issues. For example, if the plan member has remarried and has been married for at least one year prior to his/her retirement date, written spousal consent from the current spouse will be required if he/she does not name his/her current spouse as the lifetime contingent annuitant even if this occurs after entry of the PADRO.
- Lastly, if the divorce is occurring after retirement and the member is in pay status, the payment option cannot be changed. The rule of thumb for a post retirement divorce is “once a spouse, always a spouse.” Thus, while the member’s benefit payment may be divided, the payment option he has chosen, etc. straight life, 50% spouse, 10 year certain, cannot be changed.
VI. IMPORTANT SOCIAL SECURITY ISSUES
Remember, many CMERS positions are not covered by Social Security. These non-covered employees do not contribute towards Social Security, and instead make contributions towards their government pension plans. For these employees, a portion of their pensions constitutes replacement for Social Security. Therefore, in theory, the retirement benefits payable under these governmental plans could be described as being made up of two parts; (i) actual pension, and (ii) “hypothetical” social security. One issue to consider in drafting a PADRO is whether a portion of the government pension should be exempted from the marital estate to the extent that part of the pension might figuratively be considered “in lieu of” social security benefits, since social security benefits are exempt by federal statute from being part of the marital estate.
There are also other Social Security related issues to consider in drafting a PADRO.
Social Security – Age 62 Offset
The CMERS system has a built-in social security reduction. While a person can collect full retirement with 25 years of service (and ostensibly retire at 45), Conn. Gen. Stat. section 7-437 requires the CMERS retirement benefit to be reduced when the retiree is eligible for social security which is at age 62 – not at the age of “full retirement.” Full Social Security is paid at ages 65 to 67, depending on your year of birth. Employees born in 1937 or earlier are entitled to full benefits at age 65; employees born in 1960 or later will be entitled to full benefits at age 67. The full benefit age gradually increases from age 65 to 67 for those born from 1938 to 1959.
The state legislature drafted a formula for CMERS to use with regard to this age 62 reduction. In essence, the formula reduces the benefit by approximately 25% (e.g. a benefit of $1,357.17 per month would be reduced to $1,031.33). This reduction will not occur for non-Social Security CMERS participants.
In sum, if the member is retired and is covered by Social Security, his or her benefit will automatically be reduced by approximately 25% when they reach the age of 62. If the member retires after the age of 62, the benefit will be reduced at that time.
Other Social Security Provisions Potentially Affecting CMERS Retirement
Government Pension Offset
If a CMERS member receives a pension from a government job in which s/he did not pay Social Security taxes, some or all of the member’s Social Security spouse’s, widow’s or widower’s benefit may be offset due to receipt of that pension. This offset is referred to as the Government Pension Offset, or GPO.
The GPO will reduce the amount of the member’s Social Security spouse’s, widow’s or widower’s benefits by two-thirds of the amount of your government pension. For example, if the member receives a monthly civil service pension of $600, two-thirds of that, or $400, must be used to offset the Social Security spouse’s, widow’s or widower’s benefits. If the person is eligible for a $500 spouse’s benefit, the person will receive $100 per month from Social Security ($500 – $400 = $100).
This law applies if the individual receives a government pension and is eligible for Social Security benefits as a spouse or widow(er). For more information about this provision, contact Social Security for the Government Pension Offset (Publication No. 05-10007) fact sheet.
Windfall Elimination Provision
This law affects the way retirement or disability benefits are figured if the individual receives a pension from work not covered by Social Security. The Social Security Amendments of 1983 include a provision that greatly reduces the Social Security benefit of a retired or disabled worker who also receives a government annuity based on his or her own earnings. This Windfall Elimination Provision (WEP) primarily affects a MERS member if he or she earned a pension in any job where she did not pay Social Security taxes and also worked in other jobs long enough to qualify for a retirement or disability benefit. The Windfall Elimination Provision applies when:
- The member reached 62 after 1985; or
- The member became disabled after 1985; and
- The member first became eligible for a monthly pension based on work where s/he did not pay Social Security taxes after 1985. “Eligible” means the member satisfied all prerequisites (age/service) for a benefit.
- The Windfall Elimination Provision does not apply to survivors benefits and has other exclusions.
CMERS cannot answer questions on how Social Security may ultimately affect a pension or PADRO: questions on these issues must be referred to Social Security. It may very well be that the GPO and WEP provisions will have little or no impact on the pension division order. For more information, please see Windfall Elimination Provision (Publication No. 05-10045) at www.socialsecurity.gov/WEP. Or, for more information on GPO or WEP, you can contact the Social Security Administration at:
Web Site: http://www.ssa.gov
Toll-Free Number: 1-800-772-1213
VII. LEGAL SEPARATION
Connecticut is one of the few states that allow the entry of a judgment known as a legal separation. This is not a situation where a couple simply decides to reside separately while awaiting a divorce but rather a situation where the parties are economically divorced but still legally married. The parties obtain a judgment of legal separation as well as a judgment that equitably distributes assets, makes support and alimony awards, apportions debts, sells the marital home, and divides pensions. A decree of legal separation has the practical effect of a decree dissolving the marriage except that neither party is free to marry a third person.
CMERS recognizes and allows for the division of pension benefits (via a PADRO) in a legal separation. CMERS considers and treats a legal separation as if it were a divorce for purposes of retirement and survivor benefits. Thus, a decree or entry of legal separation dissolves all “surviving spouse” protections and benefits and ends any survivor entitlement under CMERS. CMERS’ position and policy is that a decree of legal separation terminates survivorship benefits and amounts to a spousal waiver sufficient to allow a re-designation of beneficiary to become effective even if these issues are not addressed in a PADRO. For the protection of the parties, all of these issues should be addressed in a PADRO as if the parties were undergoing a divorce rather than a legal separation. Also as in a divorce, if the legal separation occurs after the member has retired and is in pay status, the payment option cannot be changed. Thus, while the member’s benefit payment may be divided, the payment option he has chosen, etc. straight life, 50% spouse, 10 year certain, cannot be changed.
CMERS acknowledges that if the parties should reconcile, they may apply to the Court for a revocation or a suspension of the legal separation. It is important to note that the PADRO is not affected by a reconciliation of the parties and their resumption of cohabitation. Rather, if the parties become reconciled pursuant to a legal separation, and if CMERS has already accepted a PADRO, CMERS treats the reconciliation as if the parties had remarried as of the date the Court accepted the motion and vacated the separation. CMERS requires a certified copy of the court decision in such a case. Merely moving back in together is insufficient. There is also no continuity of benefit. For example if the legal separation and PADRO was granted on January 1st and the official reconciliation was December 31st – the spouse would not be considered the member’s spouse under CMERS for the time period of January 1 – Dec. 31st . Once again CMERS treats the entry of a judgment of legal separation as if it was a formal dissolution of marriage for all retirement and pension benefit purposes.
VIII. PLAN PROVISIONS AND CONDITIONS
- CMERS is a defined benefit plan. As such, it is funded by the municipality and the member on an actuarial basis; there are no municipal contributions individually assigned to an employee’s account. Municipal contributions are never available to the employee or to an alternate payee for distribution. Separate accounts are not maintained for Members and Alternate Payees. Do not submit an order which treat member’s interests like accounts in a defined contribution plan. Such treatment will lead to a rejection of the order, which will cause a loss of future benefits for APs. Drafters are reminded that CMERS benefits are determined by a formula and that member’s contributions (if any) does not necessarily represent the full “value” of a member’s interest.
- However, an individual employee contribution “account” has been established for the member consisting of his/her own contributions plus interest earned on the account. Actively employed participants are not eligible to withdraw any portion of the employee contribution balance. In the event of the plan member’s termination of employment or death prior to retirement, the employee contribution account may be available for distribution.
- CMERS is not required to provide for any type or form of payment, or any option that is not otherwise provided under the plan.
- An alternate payee has no individual rights with respect to the plan. Payment to the alternate payee is contingent upon the member actually retiring and receiving a retirement allowance.
- CMERS will compute the plan member’s benefit as of the member’s actual retirement date or the date of marriage dissolution. This computation will be utilized in determining the benefits payable to the alternate payee. To the extent the parties intend for the alternate payee’s interest in the plan to be factored on the date of dissolution, CMERS requires that the parties determine the value of the interest as of that particular date and state it in the order. CMERS, upon a written request, can only estimate the member’s current vested interest in the plan, if any. CMERS does not have actuaries on staff and is unable to provide information regarding the actuarial value of the benefit plan.
- No lump sum payment of the member’s contributions – if any – in the plan can be made to the alternate payee unless the member is eligible for a refund and applies for a withdrawal of such funds. A lump sum payment cannot be made to the alternate payee if the plan participant elects to receive monthly benefit payments from the plan, or if continuing payments to a survivor are required under the plan provisions.
- Lump sum payments – not to exceed the amount of the participant’s accumulated contributions and interest in the plan may be ordered in the event that the plan participant predeceases the alternate payee, provided that there are no survivors eligible for monthly benefit payments under the provisions of the plan on the date of the participant’s death, and provided the participant has not commenced receipt of monthly benefit payments.
- The IRS Code, Section 414(p)(5) provisions relating to the continuation of the alternate payee as the survivor of the plan participant are not applicable to governmental pension plans. The dissolution of the marriage will therefore terminate the spouse’s right to be treated as the surviving spouse of the plan participant.
- A plan participant may elect upon retirement to have his/her retirement benefits paid to someone else in the event of death. However, if the plan participant has been married for at least one year prior to his/her retirement date, written spousal consent will be required if he/she does not name his/her spouse as the lifetime contingent annuitant. In some cases, the plan participant may elect to have his/her retirement benefits paid to the former spouse in the event of the participant’s death. Such option elections can only be made at the time of retirement, and they become irrevocable upon the effective retirement date. The extent to which CMERS can enforce a provision which orders the participant to elect a survivor option for a former spouse will depend on the participant’s marital status and receipt of the current spouse’s consent to the option election, if required.
VII. A SUMMARY OF CMERS REQUIREMENTS FOR PADROS
A. A valid PADRO must:
- Contain the name, address and social security number of the retirement plan member.
- Contain the name, address, and social security number of the alternate payee.
- Identify CMERS as the Plan.
- State that the order is a domestic relations order (“DRO”) under the domestic relations laws of Connecticut.
- State the flat dollar amount of the member’s monthly benefit payment that is to be assigned to the alternate payee; or, in the alternative, a percentage of the member’s actual benefit payment, which must be a fixed percentage, that is to be paid to the alternate payee. If some variation on the service formula is to be used, the drafter is responsible for listing with specificity all required components (e.g. denominator, numerator, beginning and end, etc) of the formula. The Plan is not responsible for formula errors or ambiguous language on the part of the drafter.
- State the duration of monthly benefit payments to the alternate payee, which may not extend beyond the lifetime of the plan member. As benefit obligations will cease with the death of the alternate payee, CMERS is prohibited from disbursing payments to the estate of the alternate payee.
- State the contingent arrangement for the distribution of the member’s contributions and credited interest in the plan. This contingent method of payment would become operative if the member is eligible for a lump sum payment of his/her contributions and interest – if any – in the plan, and the member affirmatively elects to receive such lump sum payment; or, alternatively, the contingent arrangement becomes operative if: 1) the member dies prior to commencing monthly benefit payments under the plan, 2) the member has contributions and interest remaining in the plan, and 3) no continuing survivor payments are required in accordance with the provisions of the plan.
- State that the payments will begin at the time distributions to the member begin, i.e. when the member actually retires.
- Have the member, alternative payee and their respective attorneys (unless the parties are pro se) sign the PADRO. Unsigned PADROs are not acceptable and will be returned.
B. A valid PADRO may, if the order clearly so provides:
- Name more than one contingent annuitant if the proper payment option is chosen.
- If received and accepted by CMERS as a valid PADRO before the member retires or dies:
- Require the member’s pension benefits to be paid under a particular option.
- Bar the member from taking a refund of his/her contributions.
- Require the member’s death benefits to be paid to the AP.
C. A valid PADRO CANNOT:
- Require CMERS to maintain separate accounts.
- Require CMERS to pay any amounts to attorneys, financial institutions (except for rollovers), or others.
- Require CMERS to provide a type or form of benefit or option not already provided.
- Require CMERS to pay increased benefits (determined on the basis of actuarial value).
- Take precedence over any PADRO previously accepted by CMERS involving the same member and a different spouse.
- Use wording or statutory provisions applicable to ERISA plans.
For actuarial and other reasons, CMERS may request certain information from the Alternate Payee such as copy of his or her birth certificate, depending on what payment option is noted in the PADRO.
The Alternate Payee and the Member must notify CMERS of any change of address so that this PADRO can be carried out in accordance with the law.
Any questions you may have relative to these instructions or the sample order should be addressed to Katie Balut, CMERS Coordinator, Retirement Services Division, 55 Elm Street, Hartford, CT 06106.
See sample orders accepted in the past on the SERS website.