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, as may be allowed by the particular pension plan.
The benefits of a Separate Share, as compared to a Shared Interest, include:
- The former spouse (Alternate Payee) who received the QDRO Separate Share will have that Separate Share divided away from the Participant's remaining share so that the Alternate Payee can start receiving monthly payments over his or her lifetime (independent of the age and status of the Participant) even if the Participant is not yet in pay status or has died;
- The former spouse who received the QDRO share may be isolated from reduced benefits on account of future plan revisions;
- The former spouse who received the QDRO share may be able to name account beneficiaries, depending on the particular pension plan;
- 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 terminate employment and take that share out of the plan, if desired, depending on the plan. Usually federal pension plans allow that;
- and other benefits which are too numerous to list here (but depend on the particular pension plan.)
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 a monthly annuity, usually the Shared Interest QDRO approach must be used.