Pensions are significant marital asset. Unless parties agree otherwise a court in a divorce case may enter a Qualified Domestic Relation Order (QDRO) pay out the community portion of the retirement equally.
QDRO parameters: A “qualified domestic relations order” is an order, decree or judgment made pursuant to state domestic relations law which:
Relates to the payment of child support, spousal support or marital property rights to an “alternate payee” as defined by ERISA (i.e., a spouse, former spouse, child, or other dependent of the participant, 8:1176.1)(29 USC 1056(d)(2)(K); IRC 414(p)(8)); and which
“Creates or recognizes the existence of an alternate payee’s right to, or assigns to an alternate payee’s right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to al participant under a plan” in conformity with the “qualification” requirements discussed below. [29 USC 1056(d)(3)(B); IRC 414(p)(1)(B)’ see generally, Marriage of Shelstead (1998) 66 CA4th 893, 902, 78 CR2d 265, 370-371; Stewart v. Thorpe Holding Co. Profit Sharing Plan (9th Cir. 2000) 207 F3d 1143, 1149-1150, cert.den. (2001) 531 US 1074]
[8:1173.1] Inapplicable to domestic partners: California law cannot alter or override federal law. This is one significant area, therefore, in which registered domestic partners will not be treated under the law as spouses–i.e., because ERISA does not treat domestic partners as spouses, the California Domestic Partner Rights and REsponsibilities Act cannot make them “alternate payees” eligible for a QDRO. In turn, a state court dissolution judgment dividing domestic partner community property interests in an ERISA-governement pension cannot be made binding upon or enforceable against the plan under QDRO law.
Manner of division — in general
Judicial discretion to opt for one of two methods: Upon dissolution, trial courts have broad discretion in the division of CP interests in a pension plan. They can exercise that discretion in either of two ways (Marriage of Bergman, supra, 168 CA3d at 746, 749-750, 756, 214 CR at 663, 664-665, 670; Marriage of Gray (2007) 155 CA4th 504, 518, 66 CR3d 87, 99);
Asset distribution and cash-out division: The court may determine the present value of the community interest and award it to one spouse, with offsetting community property or a cash out equalization to the other spouse; or
In-kind division: By QDRO. Alternatively, the court may divide the community interest in kind between the spouses, reserving jurisdiction to supervise future payments to each souse. [Marriage of Bergman, supra; Marriage of Cooper (2008) 160 CA4th 574, 579-580, 73 CR3d 71, 75-76; Marriage of Brown (1976) 15 C3d 838, 848, 126 CR 633, 639]
Making the choice
[8:1127] No per se preference for either approach: So long as the net result effects an equal division, the law places no preference one approach over the other. Whether to divide the community pension interest by cash out or in-kind partition lies within the trial court’s sound discretion. [Marriage of Brown, supra, 15 C3d at 848, 126 CR at 639, fn.