GUIDELINES FOR SERS-APPROVABLE DOMESTIC RELATIONS ORDERS
SERS SAMPLE DOMESTIC RELATIONS ORDER
NOTE: The information contained in this document is not intended as legal advice and does not replace individual consultation with an attorney. SERS cannot provide legal advice or representation to members or alternate payees. If you have specific questions regarding the equitable distribution of a SERS benefit, you should contact an attorney.
Outlined below are the requirements needed to obtain an approved Domestic Relations Order (“DRO”). A copy of the sample DRO developed by the State Employees’ Retirement System (“SERS”) is also provided for your consideration in drafting an appropriate order. Preparing the parties’ DRO in accordance with the format outlined in the sample DRO may expedite SERS’ review and approval. It is strongly suggested that you submit the draft DRO for review before it is executed and filed with the court.1 Before submitting a draft DRO to SERS for review, please make sure that both parties have agreed upon the terms of the draft. SERS will NOT choose provisions for the DRO or make assumptions regarding the parties’ intentions.
Because SERS is a governmental retirement plan for governmental employees, the provisions of the Employee Retirement Income Security Act (“ERISA”) and the Retirement Equity Act of 1984 regarding qualified domestic relations orders and spousal consent do not apply to SERS. Unlike ERISA plans, this means that in the absence of an appropriate court order a member may take any action with regard to his or her SERS benefits without providing notice to or requesting consent from any person, including the member’s spouse.
Attachment of SERS retirement benefits for purposes of equitable distribution can only be accomplished through the terms of an Approved Domestic Relations Order (“ADRO”). There are several unique prerequisites that must be met before SERS can approve any DRO or amendment to an approved DRO.2 In no case can the DRO alter SERS’ benefit structure. The State Employees’ Retirement Code, 71 Pa. C.S. §§ 5901 – 5956 (“Retirement Code”), provides a myriad of benefit options to SERS members. All DROs must utilize the benefit structure established by the State Employees’ Retirement Code. Any alterations to the Retirement Code’s benefit structure are outside the jurisdiction of the Courts of Common Pleas.3
At the member’s request, SERS will provide the member’s total credited service, final average salary, and total accumulated deductions credited to the member as well as the present value of the member’s retirement account as determined by SERS on the date of the request or the date of separation, if the parties have already separated. SERS can also provide an estimate of the benefits to which the member is entitled as of the date of the request or the date of separation, whichever is earlier. The member may also request a retirement benefit estimate projected to the end of the current calendar year. Any other actuarial calculations must be made by an outside actuarial consultant at the parties’ expense and submitted to SERS for review and final approval. Upon request, SERS will provide outside actuaries with information regarding the actuarial factors used to formulate estimates. Benefit estimates cannot be released to anyone other than the member without the member’s written authorization. An interactive estimate calculator is available on SERS’ website at www.sers.state.pa.us. The calculator can be used to calculate multiple benefit estimates based on different retirement dates, amounts of service credit or final average salary figures.
If the member is receiving or will receive a disability retirement benefit based on an injury or disability that occurred during the marriage, the disability portion of the annuity is attachable through a DRO.4 Disability retirement benefit options are more limited than regular retirement benefits under the Retirement Code. Different issues must be taken into consideration in drafting a DRO dividing a disability retirement benefit. If your DRO involves a member of SERS who is receiving or anticipates receiving a disability retirement benefit, your lawyer should contact SERS’ Legal Office to discuss the issues which must be addressed.
The division of benefits between the member and alternate payee must be clear and unambiguous within the four corners of the DRO. SERS will not approve any DRO that requires reference to property settlement agreements, trust documents, etc. to calculate benefit formulas or determine payout information.5 SERS has no power to compel a party’s compliance with any of the terms of a DRO. Therefore, SERS cannot accept a DRO containing terms contingent on events other than the member’s death or retirement, such as the sale of the marital home or the member’s purchase of life insurance.
Generally, the following information should appear in the DRO:
A. The portion of the retirement benefits attributable to the marriage. This statement must include the actual dates (month, day, year) of the measuring period if such dates are necessary to determine the benefit to be divided.
B. The marital share of the retirement benefit, expressed as either a percentage or dollar amount. The dollar amount payable to the alternate payee cannot exceed the amount of the member’s monthly retirement benefit. The parties should also specify whether the alternate payee’s portion includes post-separation enhancements such as post-separation purchases of service rendered during the marriage.
C. The benefit to be divided. The actual benefit option to be selected should be identified as it is described in the Retirement Code (Maximum Single Life Annuity, Option 1, etc.). If the option to be selected is not identified, the DRO must state that the member may select any benefit option available at retirement. A lack of specificity in the option description provision may render the DRO unenforceable due to vagueness and trigger further litigation as to how distribution should occur. If the alternate payee is to be the member’s survivor annuitant, the terms of the DRO must require the member to so nominate the alternate payee.
D. Whether the member may take a lump sum withdrawal of all or part of his or her member contributions and interest (“accumulated deductions”) and how that withdrawal is to be divided between the parties. The DRO should be explicit with regard to the member’s authorization to take a lump sum, the extent of the withdrawal, and the share, if any, payable to the alternate payee. If the DRO does not state that the member may elect to take a lump sum withdrawal, the member will not be permitted to do so.
E. The address of the alternate payee must be included in the DRO. The alternate payee must maintain a current address on file with SERS at all times. This duty must be noted in the DRO.
Unlike ERISA plans, the rights of the alternate payee are entirely derivative of the member’s rights. The alternate payee cannot name beneficiaries or receive a separate interest in the member’s SERS benefit. Additionally, the DRO must require the Member to execute a release authorizing the alternate payee to access the information SERS maintains on the member, so that the member’s compliance with the terms of the DRO may be monitored.6
Please note that the expression “present value” used by SERS is a statutory term which refers to the amount of money SERS will need to have at the time of the member’s retirement (invested at an assumed rate of 4% compounded annually) in order to pay a member’s retirement annuity for his or her expected lifetime. The term accurately describes the available Option 1 death benefit but does not represent an account balance that can be tapped to provide a lump sum payment to the alternate payee.
If the DRO provides that the alternate payee is entitled to a marital portion of a member’s lump sum death benefit, the DRO must nominate the alternate payee as an irrevocable beneficiary.7 The SERS benefit structure does not provide automatic death or survivor benefits to anyone.
All benefits paid by SERS are subject to the terms of the Public Employee Pension Forfeiture Act, 43 P.S. § 1311 et seq. Under certain circumstances, the member’s conviction for one of the crimes enumerated in that statute may cause the forfeiture of all benefits payable to the member and alternate payee. Special forfeiture provisions above and beyond the Public Employee Pension Forfeiture Act apply to members of the judiciary.
Revised March 29, 2010
1N.B.: SERS’ review of a DRO will only encompass the DRO’s compliance with SERS’ requirements for approval. SERS will not offer advice on the desirability of a particular benefit option or plan of distribution and does not provide legal advice or representation to persons seeking a DRO. This information and SERS’ sample DRO do not constitute legal advice and are not substitutes for consultation with an attorney. Return
2Requirements for SERS’ approval of a DRO are set forth at 71 Pa. C.S. §§ 5102 (definitions of “alternate payee,” “approved domestic relations order,” “domestic relations order,” “irrevocable beneficiary” and “irrevocable survivor annuitant”), 5705, 5953, 5953.1, 5953.2, 5953.3, and 5953.4. Upon request, SERS’ Legal Office will provide information to attorneys seeking to draft DROs acceptable to the agency. Return
3See Maloney v. Maloney, 754 A.2d 36 (Pa. Cmwlth. 2000), alloc. den. 565 Pa. 678, 775 A.2d 810 (2001). Return
4See Drake v. Drake, 555 Pa. 481, 725 A.2d 717 (1999). Return
671 Pa. C.S. Section 5953.1(a)(7).
7If the alternate payee is to receive an annuity for his or her lifetime in the event the member predeceases the alternate payee after retirement, the DRO must specify that the alternate payee will be nominated as an irrevocable survivor annuitant. Upon filing for retirement benefits, the member will be required to fill out the SERS retirement application necessary to elect such a benefit option. In certain instances, the member may be required to nominate the non-member spouse as beneficiary on a SERS beneficiary designation form, depending on the facts of the case. Return
Sample Domestic Relations Order and Instructions (103 KB PDF)