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Divorce and Your Benefits

Other Benefits Potentially Affected

Beneficiary Designations

Effective July 7, 2008, the Participant’s designation of a spouse as beneficiary of certain benefits is revoked as a result of divorce, annulment or judicial separation and the Retirement System receives written notice. The designation is revoked regardless of when the final decree of divorce, annulment or judicial separation was entered, unless a DRO specifies otherwise.

Designations affected are:

  • Pre-retirement Ordinary Death Benefit (all Tiers);
  • Post-retirement Ordinary Death Benefit (ERS Tiers 2, 3, and 4);
  • Cash Refund Initial Value option (Tier 1);
  • Cash Refund Contributions option (Tiers 1 and 2);
  • Five and Ten Year Certain options (all Tiers);
  • Certain alternative options with beneficiaries that can be changed.

If a Participant wishes to keep an ex-spouse as beneficiary, the Participant must re-designate him or her after the date of the divorce, annulment, or judicial separation. Contact us for the appropriate form.

If a Participant and an ex-spouse remarry each other, the designation of the ex-spouse as beneficiary is reinstated, provided the Participant has not made another designation during the time the marriage was dissolved.

Ordinary (Pre-Retirement) Death Benefit

The Retirement and Social Security Law provides for a pre-retirement ordinary death benefit payable to the Participant’s last designated beneficiary(ies). In order to be effective, the Participant must properly execute and file the appropriate designation form with the Retirement System. (Retirement and Social Security Law, Sections 60, 360, 508, 606).

A DRO may direct a Participant to designate the ex-spouse to receive a portion of the ordinary death benefit. The ex-spouse’s portion is generally calculated with reference to the Majauskas formula but may vary based on the party’s agreement.

The DRO should be filed with the Retirement System as soon as possible after the DRO is entered as an official court document. Prompt filing of the DRO provides notice to the Retirement System of the Participant’s required beneficiary obligation.

The Participant should contact the Retirement System for the opportunity to designate additional beneficiary(ies), of choice, for any remainder of the death benefit after the ex-spouse’s share is determined. The Retirement System will prepare a customized designation form in compliance with the DRO and Participant’s additional beneficiary(ies) designations.

Accidental Death Benefit

The beneficiaries of an accidental death benefit are statutorily designated (Retirement and Social Security Law, Sections 61, 361, 509 and 607). The Retirement System has no discretion to pay the ex-spouse. Only the statutory beneficiaries may receive this benefit, in spite of the existence of a filed DRO.

For a Tier 1 or 2 Employees’s Retirement System Participant, the accidental death benefit will be paid respectively to:

  • The surviving spouse; or
  • Any children under age eighteen; or
  • Dependent parents.

For a Tier 1 or 2 Police and Fire Retirement System Participant, the accidental death benefit will be paid respectively to:

  • The surviving spouse; or
  • Any children under age eighteen; or
  • Any children under age twenty-three, if a full-time student; or
  • Dependent parents.

For a Tier 3, 4 or 5 Participant, the accidental death benefit will be paid respectively to:

  • The surviving spouse who has not renounced survivorship rights in a separation agreement; or
  • Any surviving children until age twenty-five; or
  • Dependent parents; or
  • Any person until the age of twenty-one who qualified as a dependant on the final federal income tax of the Participant or the return filed the year preceding the date of death.
ERS Post-Retirement Ordinary Death Benefit

Most Tier 2, 3, 4 or 5 Employees’s Retirement System Participants are covered by a post-retirement ordinary death benefit. The benefit is payable to the beneficiary(ies) designated by the Participant. If a Participant is required to provide an ex-spouse with a portion of the ordinary death benefit after retirement, the following paragraph should appear in the DRO:

ORDERED, that the PARTICIPANT shall designate the ALTERNATE PAYEE as the PARTICIPANT’S beneficiary so that, in the event an ordinary death benefit becomes payable post-retirement, the ALTERNATE PAYEE shall be entitled to a pro rata share calculated according to____ (provide the method for determining the ALTERNATE PAYEE’S share of the PARTICIPANT’S retirement benefit, a specific dollar amount or a percentage), and it is further;

The DRO should be filed with the Retirement System as soon as possible after the DRO is entered as an official court document. Prompt filing of the DRO provides notice to the Retirement System of the Participant’s required beneficiary obligation.

The Participant should contact the Retirement System for the opportunity to designate additional beneficiary(ies), of choice, for any remainder of the death benefit after the ex-spouse’s share is determined. The Retirement System will prepare a customized designation form in compliance with the DRO and Participant’s additional beneficiary(ies) designations.

Retirement Option

At retirement, a Participant must choose one option which determines how the retirement benefit will be paid. There are several options for the Participant to choose from and all options will pay the Participant a monthly benefit for life. The Single Life Allowance is the maximum benefit available to the Participant. The Participant can choose to receive a reduced monthly amount to provide for payment to a designated beneficiary after the Participant’s death.

Some DROs require a Participant to elect a retirement option that provides a continuing benefit to the ex-spouse should the Participant predecease him or her.

The most common option elected is a Special Joint Allowance, which provides the ex-spouse with the same share of the retirement benefit that he or she had been receiving while the Participant was alive.

The Participant may also elect a Pop-Up Special Joint Allowance that provides the ex-spouse with a share as described above, but the benefit payment to the Participant will “pop-up” to a Single Life Allowance should the ex-spouse predecease the Participant.

The parties should be aware that:

  1. The Participant cannot change the option beneficiary once the retirement is effective; and
  2. The Participant cannot designate additional option beneficiaries (i.e., if Participant remarries) even though the ex-spouse may only be receiving a small share of the overall pension benefit.

For a full description of each retirement option, see Option Descriptions.

Who “Pays” the Cost of the Option?

The cost of a survivorship option can be borne by either party or shared proportionately by the parties.

Example: Participant bearing the option cost

ORDERED, that at such time as PARTICIPANT has retired from and is actually receiving a retirement benefit from the New York State and Local Retirement System, the New York State and Local Retirement System, in accordance with the Equitable Distribution Law, and in accordance with the formula devised in the case of Majauskas v. Majauskas is directed to pay to ALTERNATE PAYEE from PARTICIPANT’s retirement benefit, ______ percent of a fraction of PARTICIPANT’s maximum monthly retirement benefit prior to any optional modification; and it is further

Example: Cost of the option being apportioned

ORDERED, that at such time as PARTICIPANT has retired from and is actually receiving a retirement benefit from the New York State and Local Retirement System, the New York State and Local System, in accordance with the Equitable Distribution Law, and with the formula devised in the case of Majauskas v. Majauskas is directed to pay to the ALTERNATE PAYEE from PARTICIPANT’s retirement benefit, ______ percent of a fraction of PARTICIPANT’s gross monthly retirement benefit; and it is further

Example: Ex-spouse bearing the option cost

ORDERED, that at such time as PARTICIPANT has retired from and is actually receiving a retirement benefit from the New York State and Local Retirement System, the New York State and Local System, in accordance with the Equitable Distribution Law, and in accordance with the formula devised in the case of Majauskas v. Majauskas is directed to pay to the ALTERNATE PAYEE from PARTICIPANT’s retirement benefit, ______ percent of a fraction of PARTICIPANT’s maximum monthly retirement benefit; and it is further

ORDERED, that the cost of the required survivorship option shall be borne by the ALTERNATE PAYEE; and it is further

In the rare instances where the parties choose to share the cost of the option equally (50/50), the following language should be used:

Example: Cost of the option shared equally (50/50)

ORDERED, that at such time as PARTICIPANT has retired from and is actually receiving a retirement benefit from the New York State and Local Retirement System, the New York State and Local System, in accordance with the Equitable Distribution Law, and in accordance with the formula devised in the case of Majauskas v. Majauskas is directed to pay to the ALTERNATE PAYEE from PARTICIPANT’s retirement benefit, ______ percent of a fraction of PARTICIPANT’s maximum monthly retirement benefit; and it is further

ORDERED, that the cost of the required survivorship option shall be borne equally by the parties; and it is further

Should the Participant choose to elect the “pop-up” feature, the additional cost can be borne solely by the Participant.

Example: Participant bearing the cost of a “pop-up”

ORDERED, that should the PARTICIPANT elect the pop-up feature, any cost associated with that election shall be borne by the PARTICIPANT; and it is further

Cost-of-Living Adjustment (COLA)

An ex-spouse may be entitled to a distribution of a Participant’s COLA, not as an option beneficiary, but as part of the overall distribution from the Participant’s monthly retirement benefit while the Participant is still living. This requires a review of a DRO to determine whether the order permits, forbids, or requires such a distribution. Upon request, the Retirement System will review an order to determine if a COLA is permitted.

Please note that the Retirement System will interpret general terms in a DRO as intent to provide an ex-spouse with a share of the COLA, unless otherwise indicated. For example, the Retirement System will interpret DROs that define the retirement benefit to include any “supplemental” payments as intent to provide the ex-spouse with COLA. If the intent is to prohibit an ex-spouse from receiving a share of the COLA, the order must be drafted to reflect that intent.

If a DRO awards an ex-spouse a flat dollar amount, no COLA will be payable unless the DRO specifically directs the Retirement System to provide COLA increases.

The COLA legislation (Laws of 2000, Chapter 125) does not permit a non-spouse option beneficiary to receive a COLA after the Participant’s death. Therefore, an ex-spouse receiving a COLA distribution from the Participant’s monthly retirement benefit while the Participant is alive, will not be entitled to any COLA including COLAs previously awarded, as an option beneficiary if the Participant predeceases him or her.

Refunds

Occasionally, a Participant may be entitled to a refund of contributions due to tier reinstatement, withdrawal, transfer of membership, excess contributions, etc. If there is a DRO on file, the Matrimonial Unit will determine whether the entire refund can be paid to the Participant or whether a portion must be distributed to the ex-spouse. As a rule, if the DRO is silent on the issue of a refund of contributions, the refund will be sent to the Participant only.

If the ex-spouse is entitled to a portion of the refunded contributions, the following paragraph should appear in the order:

ORDERED, that in the event the PARTICIPANT becomes eligible to receive a return of accumulated annual contributions plus interest, the ALTERNATE PAYEE shall receive his or her pro rata share of the accumulated contributions plus interest of the refund; and it is further

Loans

All ERS and PFRS members who meet eligibility requirements can borrow up to 75 percent of their contribution balance. If the Participant has an outstanding loan balance at retirement, the annual benefit will be permanently reduced for each loan taking into consideration the Participant’s age at retirement and whether the Participant retired under a service or disability benefit. Please see the Tiers 3, 4 & 5 Loan Application (RS5025-A) Adobe pdf for approximate annual reductions. Accordingly, the ex-spouse’s share of the distribution will also be reduced unless the DRO provides the ex-spouse with a share calculated without reference to any outstanding loans.

The Retirement System may not be able to provide an ex-spouse with his or her full equitable share of the pension if the reduction for the outstanding loan is exceptionally large. Under these circumstances, a previously accepted DRO may be rejected at retirement due to an insufficiency of funds for the ex-spouse.

A DRO may prohibit the Participant from taking loans.