Pension Plan Separate Share QDRO

Summary: In almost all cases, a Colorado pension plan should be divided using the Separate Share approach, rather than the Shared Interest approach..

Use a QDRO to Create a Separate Share Interest

Using the Separate Share approach, a pension plan is valued and divided into two separate shares as of the valuation date. Under Colorado law, the valuation date is the date of the decree, or some other date by agreement.

The two Separate Shares are then administered totally separate. There is no commingling or any other interaction between the two separate accounts.

Then, generally the former spouses have no financial ties to each other and each can do whatever they want with their own Separate Share.

The benefits of a Separate Share, as compared to a Shared Interest, include:

• The former spouse who received the QDRO share is free to do with that share as is desired, often this means that the Separate Share can be removed from the plan and rolled out into a 401(k) plan;
• The former spouse who received the QDRO share can invest that share as desired, without any hindrance from the other former spouse who is the plan participant;
• The former spouse who received the QDRO share can be isolated from reduced benefits on account of future plan revisions;
• The former spouse who received the QDRO share can name account beneficiaries, including a "new" spouse;
• The former spouse who is the plan participant (employee) is also free to do with the remaining account balance as desired, without any hindrance from the other former spouse;
• The former spouse who is the plan participant can name a "new" spouse as the beneficiary under a joint and survivor annuity option without any hindrance from the other former spouse;
• The former spouse who is the plan participant can terminate employment and take that share out of the plan, if desired;
• and other benefits which are too numerous to list here.

In almost all cases, the Separate Share approach should be used, to the benefit of both former spouses. However, if the plan participant (employee) has already retired and is receiving retirement benefits in the form of an annuity, usually the Shared Interest approach must be used.

Unfortunately, in 2014 Many Pensions are Being Eliminated

In 2014 many defined benefit pensions are being eliminated in favor of defined contribution plans. Employers can no longer afford to keep funding plans which guarantee monthly payments for life. This means that pension plan Participants are losing their pension rights. The accounts are being transitioned into 401(k), 403(b), etc. Participants now have to contribute more of their earnings into retirement plans.