The following are the five public pension plan in Ohio:

Ohio Public Employees Retirement System (OPERS)
State Teachers Retirement System of Ohio (STRS)
School Employees Retirement System of Ohio (SERS)
Ohio Police and Fire Pension Fund (OPF)
Ohio State Highway Patrol Retirement System (OSHPRS)

Prior to January 1, 2002 these plans were not directly divisible by court order.  In many cases, courts offset every other asset of the marriage against the pension, leaving the participant nothing but the pension.  Over the years courts and practitioners adopted a method of requiring the participant to make direct payments to the former spouse each month after retirement.

House Bill 535 changed this and enabled these plans to be divided by a Division of Property Order (DOPO).  At that time the plans developed an agreed format and began accepting orders that strictly followed their model.  To this day the plans will reject an order that varies from their pre-determined format and wording.  The form was revised in 2003 and 2010 to attempt to accommodate partial lump sum options and to clarify certain wording. 

From the beginning, the DOPO was less than sufficient to secure an Alternate Payee’s full pension interest.  Although it secures payments from the plan to the Alternate Payee during the Participant’s life, it does not fully assign an equitable interest to a former spouse.  House Bill 98 became effective on October 27, 2006 H.B. 98 granting a “pro-rata” share of post retirement cost of living adjustments (COLA) and creating a new form of payment which allow a former spouse to be named for post-retirement survivorship.  This new option allows the post retirement survivorship to be divided between up to four individuals.  Although this now provides a possible solution to survivorship problems for a former spouse, care must be taken to accomplish this.  A divorced participant who is remarried at the time of retirement will have the option to elect survivorship for the former spouse as well as the current spouse.  However, the plan will not force the participant to make an election of a joint and survivor annuity unless they receive a copy of a court order that requires the Participant to do so.  This should be standard practice in all cases involving a state plan.

IMPORTANT: There is still no pre-retirement survivorship for alternate payees.  If the participant dies prior to retirement, the alternate payee could lose their entire interest in the pension.  Because of this fact, we continue to suggest that there be a term life insurance policy to cover the alternate payee's interest in the plan.  This policy would need to remain in effect at least until the participant retires and elects a form a payment that secures survivorship for the alternate payee.  If the participant does not choose such a form of payment the policy would need to remain in place forever.

The most significant concern that exists when dividing public pension is survivorship.  What happens if the participant dies?  The state mandated form does not include survivorship protection for a former spouse, either pre-retirement or post-retirement.  This means that unless the separation agreement or judgment entry contains specific language, the former spouse may not receive anything from the plan upon the death of the participant.

We recommend that you follow three steps in securing the critical protection for former spouses of state plan participants.

First, the separation agreement or judgment entry should require a term life insurance policy that will remain in effect until the participant retires.  This policy should be owned by the former spouse and the participant should be ordered to cooperate in obtaining the policy.  Any agreement can be made regarding how the premiums are paid.  This policy takes the place of a pre-retirement survivor annuity.  In the event that the participant dies before retirement, this policy will pay the former spouse a certain amount which should be equal to one-half of the marital portion of the plan.  It will be necessary to have a present value prepared to determine the appropriate amount of life insurance.  Since the maximum loss to the former spouse results from the participant dying the day before retirement eligibility, the former spouse’s half of the present value should be compounded out to the date of likely retirement.    

Second, the participant should be ordered to elect the former spouse for a post-retirement joint and survivor annuity upon retirement.  The percentage that should be elected is the result of the traditional coverture formula; 50% times the coverture fraction.  Remember that this election cannot be made until the participant retires.  Should the participant be remarried at that time, they will have to elect the multiple beneficiary option extending 50% survivorship to the current spouse and the ordered amount to the former spouse.  In the event that several surviving annuitants are elected, it is important to calculate the former spouse’s share of the monthly pension benefit excluding the reductions for other individuals.

Third, be sure to provide a certified copy of the Decree to the plan administrator.  This should be sent to the attention of the legal department and should direct them to the page and paragraph in which the post-retirement joint and survivorship is ordered.  Once the plan is notified in this way they will only allow the participant to retire if they comply with the Order of the court and elect the appropriate survivorship.

We maintain regular contact with legal counsel at all of the state pension plans and have developed detailed Judgment Entry language to fully secure the former spouse’s interest in the plan.  This language is updated on a regular basis as we learn specifics of how each plan interprets and administers DOPOs.  Call us today to discuss the specifics of your state plan division or send us a completed Division of Property Order Request Form.  We can draft a DOPO, prepare detailed Judgment Entry language, or both in our State Plan Package.