How Divorce Affects Retirement, Payouts

The following Q&A is a continuation of the series prepared by the New York State and Local Retirement System (NYSLRS) covering Domestic Relations Orders.

1. I am a Participant of the Retirement System and I am divorced. Can I retire if there is no DRO on file?

Yes, you are permitted to retire. If you have an obligation to provide your ex-spouse with part of your pension and there is no DRO on file, the obligation is yours alone. The Retirement System will not take a distribution on your exspouse's behalf; however, you may be obligated to pay your ex-spouse directly.

2. I am a Participant of the Retirement System with a DRO on file. I am told that this will hold up my pension. Is this true?

No. Though the DRO will be referred to the Matrimonial Bureau for review, it will not hold up your retirement.

3. I am a Participant with a DRO on file. When I retire, will I receive advance or partial pay based on my estimated benefits while the Retirement System is calculating my pension, or will I have to wait until my pension is finalized to receive any payments?

You will receive advance payments, although there may be a slight delay while we calculate the appropriate amount. The Retirement System must take into account the share we will pay your ex-spouse.

4. Will my ex-spouse receive advance or partial pay based on my estimated benefits while the Retirement System is calculating my pension benefit?

No, however, once your retirement benefit is finalized, your ex-spouse will receive a lump sum payment retroactive to your date of retirement. Please note that this only applies to situations where the signed DRO is on file before the retirement is finalized.

5. I am applying for a disability retirement and I am divorced (or going through a divorce). Will my exspouse be entitled to a share of my disability pension?

Yes. The courts have held that a disability pension is subject to distribution; however, the court may limit your exspouse to a share of what a hypothetical service pension would have paid you. The DRO must include specific language regarding this distribution.

6. I am the ex-spouse of an active Participant. The DRO entitles me to a share of his or her pre-retirement death benefit. Can I find out whether he or she has designated me as beneficiary?

If you send a written request to our Matrimonial Unit, their response will let you know if you are a designated beneficiary. The Retirement System will not, however, provide you with the identities of any other designated beneficiaries.

7. I am a Participant and have a DRO which provides my ex-spouse with a Spe- cial Joint Allowance option upon my retirement. What does this mean?

When you retire, the Retirement System will calculate the precise amount of your ex-spouse's marital share, and your ex-spouse will receive this share for the duration of his or her life. For example, if your exspouse was entitled to a 33-percent share of the pension, the Retirement System will continue to pay this amount for the duration of your exspouse's life, even if you predecease him or her.

8. I am a Tier 1 or 2 member and eligible to receive Article 19 service at retirement. Will the calculation of my ex-spouse's distribution include this additional service (applies also to early retirement incentives)?

This will depend on the precise wording of the DRO on file. If the DRO lists a fixed number of months or years in the numerator of the Majauskas formula, the Retirement System will not apportion Article 19 or incentive service. However, if the DRO requires us to calculate all marital service between two dates (i.e. the date of marriage and the date of the commencement of divorce) then we will pro-rate the additional service into the numerator, and include the total of the additional service in the denominator.

9. Will my ex-spouse's share of my pension be based, in part, on my military service credit?

Any military service you purchase will be added to your total service credit at retirement. Since your total service credit increases but the service credit for the duration of the marriage remains the same, the percentage of your ex-spouse's share is reduced. Proportionally, you will receive a greater increase from the purchase of military service than your exspouse. If you do not want military service used in the calculation at all, the DRO must reflect that.

10. I am planning to purchase service credit. Will this affect my ex-spouse's share?

Possibly, but, as in the case of military service, the overall gain to you may not be reflected in a gain to your ex-spouse. The purchase of service credit usually reduces the percentage share for the ex-spouse.

Mr. Frank is a fee-only Retirement Financial Planner and a retired city high school Teacher of Accounting. He can be reached by telephone at (732) 536-9472, or via e-mail at rollover@optonline.net