QDRO Consultants Co. specializes in the drafting of court orders to divide Railroad Tier II pensions. Our fee for drafting a Tier II court order is $400, and it is guaranteed through approval. If your client (or client's spouse) is a railroad employee, we encourage you to read the following information which may prove useful to your case and your handling of the court order to divide the member's railroad retirement benefits.
Railroad Retirement Board Benefits
If your client's ex-husband was a railroad employee, he is, in all likelihood, accruing a pension benefit under a federal pension plan known as the Railroad Retirement Board Pension Plan. The Railroad Retirement Act is a Federal law that provides retirement and disability annuities for qualified railroad employees, spouse annuities for their wives or husbands, and survivor benefits for the families of deceased employees.
Regular railroad retirement annuities are calculated under a two- tiered formula which consists of two independent annuity segments (known as "Tier I" and "Tier II" Annuities). The Tier I Annuity is calculated in basically the same way as a Social Security benefit. It's based on railroad retirement credits and any nonrailroad Social Security credits an employee has acquired. It is calculated using social Security formulas, but with railroad retirement age and service requirements. In other words, the Tier I component approximates what Social Security would pay if railroad work were covered under that system.
Consequently, the Tier I annuity is reduced by the amount of any actual Social Security benefit paid on the basis of the participant's nonrailroad employment in order to prevent duplication of benefits.
The Tier I annuity is not divisible by court order upon divorce. Therefore, your client cannot receive any portion of their ex-spouse's Tier I annuity.
Tier II Annuity is Divisible By Court Order
The Tier II annuity is based on railroad retirement credits only, and may be compared to the retirement benefits earned by workers in the private sector. Tier II represents the "pension" component of the annuity, similar to pension benefits earned by participants covered under ERISA-governed pension plans. The Board will honor a court order to divide the Tier II portion of your ex-husband's pension benefits under the Railroad Retirement Board. The following requirements must be met, however:
1. The divorce decree must be final, and issued in accordance with the laws of the jurisdiction of the court.
2. The decree must provide for the division of the employee's benefits under the Railroad Retirement Act, as distinguished from payments under any private pension.
3. The decree must provide for the division of the employee's benefits as part of a final disposition of property between the parties, rather than as an award of spousal support.
4. The decree must obligate the Railroad Retirement Board rather than the employee to make direct payments to the former spouse.
5. The decree may not divide the Tier I amount. The Board applies a property award only to the employee's non-Tier I benefits without regard to the wording of the decree.
6. The Board's Bureau of Law in Chicago must receive a properly worded decree.
When dividing the Tier II annuity, you may utilize a fixed dollar amount or a percentage. The Board will also accept the traditional "coverture" approach based on the ratio of the participant's service earned during the marriage divided by his total service at retirement. Under the Pension Protection Act of 2006, once in pay status (on or after August 17, 2007), the award will continue for the remainder of the lifetime of the alternate payee unless specifically designated to terminate upon the death of the participant
Vested Dual Benefit Payments and Supplemental Annuities
If an employee had qualified for dual benefits under both the railroad retirement system and Social Security before 1975 and meets certain vesting requirements, he/she can receive an additional annuity amount, which offsets, in part, the dual benefit reduction. This additional amount, which reflects the dual benefits payable prior to 1975, is called the "vested dual benefit payment." This vested dual benefit payment may be considered for property division purposes in the same manner as the Tier II annuity.
Participants may also be eligible for a "Supplemental Annuity" in addition to their Tier II annuity and Vested Dual Benefit Payments. The supplemental annuity is relatively small, ranging from $25 to $43 per month depending on years of service. Like the Tier II annuity and the vested dual benefit payment, the supplemental annuity may also be considered for property division purposes.
Therefore, when preparing a court order to divide the Tier II annuity, you should also include language which divides the vested dual benefit payments and the supplemental annuity, if any. Rather than specifying the Tier II component only, you should refer to the "total divisible portion" of the participant's benefits under the Railroad Retirement Board.
Survivor Rights to Tier II Annuity
Unlike other government pension plans and all qualified corporate plans, Tier II does not have a provision for election of a survivorship option. To address this situation, the Pension Protection Act of 2006 provided that, once in pay status on or after August 17, 2007, a benefit payable under a Court Order will remain payable for the lifetime of the non-participant ex-spouse, even if the participant dies. The phrase “payable even upon death” is suggested to be included in the Order. Since the benefit does not consider the lifetime of the non-participant, it effectively provides a free survivor benefit in the same amount as the partitioned award.
Spouse and Widow Benefits Under Tier II
All spouse and widow benefits under Tier II are lost upon divorce. However, these benefits are preserved under a legal separation.
Survivor Rights to Tier I Annuity ("Divorced Spouse Annuity" In Her Own Right)
Your client may be entitled to a survivor annuity from the Tier I portion of the participant's benefits in their own right, but only if they satisfy some stringent eligibility criteria (eight in all). This automatic annuity for eligible surviving former spouses is referred to as the "Divorced Spouse Annuity." The list of requirements which they must satisfy to receive this automatic survivor annuity are the following:
1. The railroad employee is at least age 62 but, under the Pension Protection Act of 2006, he no longer needs to be retired; and,
2. The divorced spouse is at least age 62 for a full month if applying for a reduced annuity, or at least age 65 if applying for an unreduced annuity; and,
3. The marriage to the employee ended in a final decree of divorce; and,
4. The divorced spouse was married to the employee for at least 10 years immediately before the date the divorce became final; and,
5. The divorced spouse is not currently married; and,
6, The divorced spouse is not entitled to a Social Security benefit based on their own earnings, the amount of which before any reductions is greater than the maximum amount to which they would be entitled as a divorced spouse annuitant; and,
7. The divorced spouse is not entitled to a spouse annuity, remarried widow(er)'s annuity or surviving divorced spouse annuity on a different Railroad Retirement Board claim number, the net monthly rate of which is greater thanhe amount to which they would be entitled as a divorced spouse annuitant; and,
8. The divorced spouse has stopped all work for pay for an employer covered by the Railroad Retirement Act, if any, and given up all rights to return to such service.
If your client has satisfied the above criteria, they should contact the Railroad Retirement Board to inquire about their Divorced Spouse Annuity. They do not need to hire a lawyer for this purpose or prepare any special court order.
Do Not Overlook Other Railroad Pension Plan Coverage
Many railroad employees not only receive retirement benefits from the Railroad Retirement Board, but may also be eligible for separate pension benefits from their employer. Many railroad companies offer supplemental pension plans for their employees. These are often defined benefit pension plans and are governed by ERISA, just as any other privately sponsored pension plan. Therefore, these plans are subject to the QDRO provisions of the law. Therefore, don't forget about your client's ex-husband's other potential plans of coverage. You should send a discovery request to his employer asking whether the participant is covered under any retirement programs (defined benefit or defined contribution) in addition to his regular retrement benefits under the Railroad Retirement Board.
Sometimes these private employer plans are integrated with the railroad pension. In other words, any benefits accrued by the participant under the Railroad Retirement Board will be subtracted from the pension earned under the private employer's plan.
Please call QDRO Consultants Co. toll-free at (800) 527-8481 to find out how we can help you with your domestic relations practice.
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