This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.
PUBLIC OFFICERS AND EMPLOYEES -- Retirement Benefits (equitable distribution of benefits in matrimonial actions)
DOMESTIC RELATIONS LAW, §236; RETIREMENT AND SOCIAL SECURITY LAW, §§110, 410: Certain pension benefits payable by the State and Local Retirement Systems constitute marital property subject to the equitable distribution provisions of the Domestic Relations Law, and, therefore, may be paid by the Retirement System to an alternative payee upon receipt of a duly issued court order in a matrimonial action.
RETIREMENT AND SOCIAL SECURITY LAW, §§60, 360, 508, 606: The Retirement System is required to pay ordinary death benefits to the beneficiary last designated by a member despite the member's contractual obligation, by separation agreement or otherwise, to designate a former spouse or other person.
We have been asked to discuss the procedures for the equitable distribution of retirement benefits payable from the New York State and Local Retirement Systems (hereinafter referred to as "the Retirement System").
Initially, we note that the Retirement System, as a governmental plan, is excepted from the provisions of the Employees' Retirement Income Security Act (ERISA) and the Internal Revenue Code (IRC) which provide for Qualified Domestic Relations Orders (QDRO's) (see ERISA, §4[b] and IRC, §414[P]). QDRO's apply only to plans to which IRC, §401(a)(13) also applies. Pursuant to the last sentence of section 401(a), subparagraph 13 applies only in the case of a plan to which section 411 relating to minimum vesting standards also applies without regard to subsection (e)(2) of such section. Section 411(e) excludes governmental plans. Unlike private pension plans, governmental plans are not required to accept a QDRO.
However, the New York Court of Appeals in Majauskas v Majauskas, 61 NY2d 481, 474 NYS2d 699, determined that certain retirement benefits payable from the Retirement System constitute marital property subject to the equitable distribution provisions of the Domestic Relations Law. Accordingly, the Retirement System will honor a properly drawn domestic relations order issued by a court of competent jurisdiction in New York State. Such order will not be considered a QDRO.
The necessity of a judicial order which provides specific direction to the Retirement System must be emphasized. Sections 110 and 410 of the Retirement and Social Security Law provide that the right of a person to a pension shall not be assignable. Accordingly, a member cannot agree, by separation agreement or otherwise, to a distribution of his pension. Any distribution must be part of a domestic relations order.
Any order directing the distribution of a retirement allowance should address the right of the individual to receive a share of the benefit, fully identify the amount or the exact method by which that share is to be determined, fully identify the alternate payee and provide a continuing current address. If it is intended that the Retirement System make the actual distribution, a specific direction to that effect should be included in the order.
Since all the assets of the Retirement System are held in a unified investment pool known as the Common Retirement Fund, a member does not have a separate, individual account. Therefore, the Retirement System will not establish a separate account for an alternate payee. The pension funds payable to a member are a statutorily created benefit held in trust by the Retirement System. The member is considered the income beneficiary of the trust. There is no such legal relationship between the Retirement System and the alternate payee.
Upon a member's retirement, the Retirement System can make deductions from the pension and pay such funds to the alternate payee. The alternate payee would not be considered a participant of the Retirement System. Accordingly, the alternate payee would not be entitled to benefits until the member actually retires and begins receiving same. Nor would the alternate payee be in a position to elect a retirement option or designate a beneficiary.
In addition, the death benefit payable to the designated beneficiary of an active member of a public retirement system was the subject of discussion by the Court of Appeals in Caravaggio v The Retirement Board of the Teachers' Retirement System of the City of New York, 36 NY2d 348, 368 NYS2d 475. In Caravaggio, it was held there could not be an irrevocable designation of beneficiary of such benefits by separation agreement or any other process. Sections 60, 360, 508 and 606 of the Retirement and Social Security Law, and other provisions of that law, provide that the member may select his or her ordinary death benefit beneficiary. The right to change that beneficiary cannot be bargained away. Thus, the Retirement System will make payment to the person(s) last designated by the member to receive the ordinary death benefits. In order to be effective, such a designation must be in writing, duly acknowledged and filed with the State Comptroller. The Retirement System, according to statute and Caravaggio, is mandated to pay the last duly designated beneficiary despite the member's contractual obligation by separation agreement or otherwise to designate a former spouse (Sussman v New York State Employees' Retirement System, Supreme Court, Nassau County, April 13, 1983).
Any accidental death benefit would be payable as provided by the State Legislature in sections 61, 361, 509 and 607 of the Retirement and Social Security Law. Pursuant to sections 61 and 361, the Retirement System is mandated to pay the benefit due on a Tier I or II member to the widow or widower, children under age eighteen or dependent parents. Sections 509 and 607 require the Retirement System to pay the benefit due on a Tier III or IV member to the eligible beneficiary defined as a surviving spouse who has not renounced survivorship rights in a separation agreement, surviving children until age twenty-five or dependent parents (Retirement and Social Security Law, §§501 and 601). There is no provision for payment to a former spouse.
We also note that the right to select a retirement option rests exclusively with the retiree unless he or she is incompetent (Retirement and Social Security Law, §§90, 390, 514 and 610). This right cannot be bargained away so as to impose a responsibility on the Retirement System other than that created by statute. If the member selects a retirement option other than that he or she was ordered to select or agreed to select as the result of a matrimonial action, the remedy lies against the member, not the Retirement System. As with the designation of a beneficiary, the State Comptroller will honor the option election filed with him by the member in accordance with the Retirement and Social Security Law.
The retirement allowance of the pensioner is a particular benefit which is subject to equitable distribution. Upon the death of the pensioner, that retirement allowance ceases. The right of the pensioner to a benefit ceases. If the retiree provided for a post-retirement death benefit, that benefit is the property of the post-retirement death benefit designated beneficiary. Again, the designation of beneficiary filed with the State Comptroller for that purpose shall govern the payment of that post-retirement death benefit.
December 19, 1990
Assistant Deputy Comptroller