What is a Pension Valuation? 

A Pension Valuation is a report that provides the lump sum present value of pension benefits earned during a marriage (for divorce purposes) or during an entire career (for retirement planning purposes). The lump sum present value provided by a Pension Valuation is determined by a number of actuarial assumptions, including mortality rates (life expectancy), interest rates, retirement ages and probability of plan insolvency.

Why might I need a Pension Valuation?  

The most common reason for a Pension Valuation is to compare the value of a pension to the value of other marital assets (for example, equity in the marital home, a 401(k), etc.) when dividing assets in a divorce. Another common reason for obtaining a Pension Valuation is to compare retirement benefit elections, such as, which age to retire or which form of benefit to elect (e.g. survivor annuity, single life annuity or lump sum) since such elections affect the amount and duration of pension benefit payments.

What is the process for obtaining a Pension Valuation? 

You may contact us or download forms from our website to provide us the information and retainer required to provide you a Pension Valuation.

What is a QDRO? 

A “QDRO” is an acronym for Qualified Domestic Relations Order. A QDRO is a court order that requires a retirement plan to pay a portion of the retirement benefits of an employee or retiree (who is called the "participant") directly to the participant’s spouse, former spouse, and/or dependent children (who are each called an “alternate payee”). QDROs generally apply to retirement plans provided by corporations and other businesses.

What must a QDRO contain? 

A QDRO must contain the following information: identification of the plan, the participant, and the alternate payee; the amount of the benefits to be paid to the alternate payee; when benefits are to be paid to the alternate payee; and how benefits are to be paid to the alternate payee (for example, a lump sum or monthly benefits).

 What are the tax effects of a QDRO? 

Benefits paid directly to any alternate payee by a plan as the result of a QDRO are generally included in the alternate payee’s taxable income in the year that the alternate payee receives benefit payments. Also, benefits paid directly to an alternate payee by a plan as the result of a QDRO are not subject to the 10% early withdrawal penalty which is generally applicable to withdrawals from retirement accounts prior to age 59-1/2.

What is an EDRO? 

An “EDRO” is an acronym for Eligible Domestic Relations Order. An EDRO is a court order that requires a retirement plan to pay a portion of the retirement benefits of an employee or retiree (who is called the "participant") directly to the participant’s spouse, former spouse, and/or dependent children (who are each called an “alternate payee”). In other words, EDROs are almost identical to QDROs as described above, except EDROs apply to retirement plans provided by Michigan public employers (for example, the State of Michigan, city and county pension plans).

What is a DRO? 

A “DRO” is an acronym for Domestic Relations Order. A DRO is a court order that requires a retirement plan or plan participant to pay a portion of the retirement benefits of an employee or retiree (who is called the "participant") to the participant’s spouse, former spouse, and/or dependent children (who are each called an “alternate payee”). In other words, DROs are similar to QDROs and EDROs as described above, except DROs apply to non-qualified deferred compensation plans (for example, stock options) and retirement plans which are only provided to executives of corporations. Also, the tax effects of a QDRO (as described above) do not usually apply to DROs.

Why might I need a QDRO, EDRO, or DRO? 

The most common reason for needing a QDRO, EDRO, or DRO is that the parties in a divorce do not have sufficient assets (e.g. cash, retirement accounts, home equity) to permit the plan participant to keep his/her entire plan benefit in exchange for the non-participant spouse being awarded another asset. A second common reason is that the parties may not agree on the present value of the pension to be offset against other assets (see “What is a Pension Valuation” above). A third common reason is to provide spousal support and/or child support payments from a retirement plan to an alternate payee (spouse, former spouse and/or dependent of the participant) by monthly pension payments or a lump sum payment from a retirement account. A fourth common reason is to pay off marital debt with retirement accounts at the time of divorce or legal separation.

What is the process for obtaining a QDRO, EDRO, or DRO? 

You may contact us or download forms from our website to provide us the information and retainer required to provide you a QDRO, EDRO, or DRO. After we draft the appropriate order, we send it to you and/or your attorney(s) as we are instructed. The attorney(s) should then review the order for legal content, obtain the required signatures and enter it with the court. After the order is entered with the court, the attorney or attorney’s client must send it to the plan administrator for qualification and implementation by the plan administrator. If you have not received a written response from the plan administrator within a reasonable time (usually 4 to 6 weeks) regarding the qualification of the order, you should contact the plan administrator for the status of the plan administrator’s review of the order.

What should I do if my ex-spouse will not sign a QDRO, EDRO, or DRO? 

Contact your attorney for possible legal remedies.

What happens if a QDRO or EDRO is rejected by a plan administrator? 

Since we guarantee that we will provide you an order which will be qualified under the plan administrator’s procedures, we will make any required changes to obtain the plan administrator’s approval of an order. After we receive a copy of a plan administrator’s rejection notice, we will promptly review the reasons for rejection and provide a revised order which satisfies the plan administrator’s requirements as stated in the rejection notice. If a plan administrator rejects an order due to its form, we will make the necessary revisions at no additional charge.

How long does the QDRO process take? 

Usually, we complete a proposed order within 1 to 2 weeks of receiving all information from the parties which we need to draft an order. After we have drafted an order it will usually take the parties 1 to 2 weeks to review the order, obtain signatures, and enter it with the court. Finally, the order must be reviewed by the plan administrator which usually takes 4 to 6 weeks. Based on the above time frames, the entire process usually takes 6 to 10 weeks.

How much is my benefit? 

You may request the plan administrator to provide you an estimate of your benefits, along with a copy of a Summary Plan Description which describes in plain language the benefits and rights you have as a plan participant. Alternatively, we can calculate your benefits as part of our Pension Valuation service.

When will I receive my money? 

When you receive your money from the plan is determined by the plan’s benefit payment provisions. As a general rule, plans which have account balances (for example, a 401(k) savings plan, 403(b) tax sheltered annuity and profit sharing plan) will allow an immediate tax-free rollover to the alternate payee’s IRA, or pay an immediate taxable lump sum cash distribution to an alternate payee. Furthermore, pension plans don’t typically pay monthly benefits to an alternate payee until the participant has satisfied the plan’s age and service requirements to be eligible for early retirement. Your eligibility for benefit payments will be described in detail in the Summary Plan Description and the plan administrator’s QDRO procedures.

Can I receive a lump sum payment? 

As a general rule, plans which have account balances (for example, a 401(k) savings plans, 403(b) tax sheltered annuity and profit sharing plan) will allow an immediate taxable lump sum cash distribution to an alternate payee. However, very few pension plans pay lump sums since they typically only pay monthly lifetime benefits.

If a retirement plan has a model (i.e. sample) order, should I use it? 

It depends on whether the model order protects both the alternate payee’s and participant’s interests. Since most model orders don’t contain clear, thorough or fair provisions which protect both the alternate payee’s and participant’s interests, we don’t typically use them unless the client or the plan administrator insists.

Why should I hire Gregg L. Kabacinski & Associates? 

Pension plans, QDROs, EDROs, and DROs contain complicated benefit provisions and actuarial terminology which divorce financial analysts and divorce attorneys do not fully understand, nor can they translate the words to numbers (i.e. the amount of your survivor annuity or pension benefit options). We have the actuarial and financial expertise to understand these complex benefit issues which we have gained through our relevant education and over 30 years of relevant experience.

What are your fees? 

Our fees are detailed in our fee schedule provided in this website. If you have any questions about our fees, please contact us.

How do I get started? 

You can contact us, or download forms from our website to provide us the information we need to get started. Someone from our office will contact you shortly after you provide the items we need to get started.

Where can I get more information about QDROs? 

The U.S. Department of Labor website provides a booklet entitled "QDROs: The Division of Pensions Through Qualified Domestic Relations Orders", which gives answers to frequently asked questions regarding QDROs. The booklet can be found at http://www.dol.gov/ebsa/publications/qdros.html.

Where can I get more information about my retirement benefits? 

The U.S. Department of Labor website provides information on a number of retirement plan topics at http://www.dol.gov/dol/topic/retirement/index.htm.

The U.S. Department of Labor website provides a summary of your rights as a plan participant or alternate payee. You are entitled to an estimate of your plan benefits, a copy of the plan’s QDRO procedures, and a Summary Plan Description if you submit a written request to the plan administrator. To learn more about your rights as a plan participant or alternate payee, go to http://www.dol.gov/dol/topic/retirement/participantrights.htm.

The Social Security Administration website provides valuable information regarding social security retirement benefits, disability benefits and Medicare. You may request a copy of your Social Security Statement, which includes a history of your earnings, estimates of your present Social Security disability benefits, future Social Security retirement benefits, and benefit estimates for your family members (including former spouses). You may request your Social Security Statement at https://secure.ssa.gov/apps6z/isss/main.html. 

 
Gregg L. Kabacinski and Associates | 1530 Rochester Road Royal Oak, Michigan 48067
Phone: 248-545-5200  | Fax: 248-545-8312