Legislation was passed into law last year that updated and clarified provisions related to marriage dissolutions. Distributions are now clearly permitted following the divorce of a relief association member, and options are now provided regarding these distributions. While relief associations have traditionally paid amounts to the former spouse (or “alternate payee”) after a relief association member gets divorced, the 2022 law changes expressly authorize these payments and provide definitions of the terms “qualified domestic relations order” and “alternate payee.”
The new law also permits a relief association, if its bylaws allow, to pay the benefit amount due to the alternate payee immediately following finalization of the divorce, rather than waiting until the relief association member reaches age 50 and separates from active service. Allowing payment as soon as practicable following finalization of the divorce helps ease the administrative burden of maintaining records and contact information of former spouses. Relief associations wishing to permit these immediate payments must do so through an amendment to their bylaws. The relief association member cannot be paid his or her portion of the benefit until after reaching the relief association’s minimum retirement age and separating from active service.
For relief associations that pay monthly service pensions, the new law allows the relief association to amend its bylaws to permit payment to the former spouse in a lump sum amount, rather than as a monthly benefit.
All relief associations must permit the former spouse to elect a direct rollover of his or her portion of the benefit, if the service pension is an eligible rollover distribution.
If a member of a relief association is involved in a divorce proceeding, the relief association might be contacted for information by the parties in the divorce or their attorneys. The value of the member’s accrued benefit may be important to appropriately evaluate the marital assets. Courts may either award a percentage of the member’s benefit to the ex-spouse or a flat dollar amount. The division method may depend upon whether the member was active or retired at the time of the marriage dissolution.
Relief associations are usually given a draft copy of the divorce judgment or decree before it is filed with the court. If your relief association has questions regarding the draft of the judgment, your association should discuss it with the attorneys for both parties, the court, and/or the association’s own legal counsel.
Published last in the August 2023 Pension Newsletter