Focused senior woman in yoga pose researching state retirement plans and divorce laws on her laptop, symbolizing calm and informed decision-making.

As a divorce attorney in Dallas, I’ve seen many questions arise when it comes to state governmental retirement plans and divorce. In this blog post, I’ll answer some of the most common questions to help you understand your rights and options in this complex area.

What is ERISA and How Does it Relate to State Retirement Systems?

ERISA (Employee Retirement Income Security Act) is a federal law that sets standards for private sector employee benefit plans, including pension plans and 401(k)s. State retirement systems, on the other hand, are specifically excluded from the provisions of ERISA. However, some states, including Texas, have enacted laws similar to ERISA that provide anti-alienation provisions to these public retirement systems.

How is a Qualified Domestic Relations Order Determined in a State Retirement System?

The administrative head of a state retirement system or their designee has the exclusive authority to determine whether a divorce order is a qualified domestic relations order (QDRO). This determination can only be appealed to the board of trustees of the system. A QDRO is a court order that allows a portion of the member’s retirement benefits to be paid to an alternate payee, typically the non-employee spouse.

Can a QDRO Require the Member to Choose a Certain Benefit Payment Plan or Option?

No. A state retirement system will reject a QDRO that requires the member to select a particular benefit payment plan or option. This is because the member has the right to choose their own payment plan or option.

Is it Required to Divide a State Retirement Plan in a Divorce?

Texas law does not require the division of a state retirement plan, but the nature of these plans can make them difficult to value for the purpose of “trading” assets. If the retirement benefit is not divided but awarded 100% to the member, no QDRO is required, but the divorce decree should be very specific in making the award.

How Does the Value of the State Retirement Plan Get Determined in a Divorce?

The amount of the participant’s contributions to the plan has little to do with the value of the plan. These are not defined contribution plans, and the amount of the participant’s contributions as reflected on the annual statement does not account for the employer’s “matching” contributions. The value of the state retirement plan can be difficult to determine, and it’s important to have an experienced attorney to help you navigate this process.

Are There Different Options for Withdrawing or Receiving Payments from a State Retirement Plan?

Most state retirement plans require member contributions and have options for withdrawing contributions with interest or receiving monthly annuity payments. In some plans, a member may be able to take a partial lump-sum distribution and a reduced monthly annuity payment.

Can a Lump Sum Amount be Awarded from a State Retirement Plan in a Divorce?

Some state retirement plans, such as the Texas County and District Retirement System (TCDRS) and the Texas Municipal Retirement System (TMRS), have models that allow the award of a lump-sum amount. However, immediate lump-sum distributions are not allowed. If the participant terminates employment and elects to take a refund of their contributions, only then would a lump sum be payable to the alternate payee.

When Will Payments to the Alternate Payee Begin in a State Retirement Plan?

Payments to the alternate payee will begin only when payments begin to the participant. This means that the alternate payee will not receive payments until the member starts receiving payments from the state retirement plan.

In conclusion, state governmental plans and divorce can be complex and it’s important to understand your rights and options. If you’re going through a divorce and have questions about state retirement plans, it’s essential to have an experienced attorney on your side.

To retain an experienced Texas divorce lawyer for your divorce or child custody case in DallasDentonCollin or Rockwall County, please schedule a consultation with us today.