QDRO Corner: Is the Survivor Benefit Worth the Negotiation?

Most pensions allow for the participant to designate a survivor to continue to receive payments from the pension after the participant’s death. Traditionally, plan participants select their spouse as the survivor, but upon divorce, they often no longer wish for their spouse to receive such a benefit.

Here are some factors to consider when discussing with your client whether it’s worth a negotiation regarding the disposition of the survivor benefit in the divorce:

1.    What is the cost of the benefit (described in the June 22, 2021 blog post)? Is the cost worth it to them as compared to the anticipated benefit?  Would life insurance or a beneficiary designation on another account be more cost effective?

 2.    Does the plan allow for multiple survivors? If you represent the plan participant, see if your client anticipates getting remarried, and if so, how soon. Some plans, such as military retired pay, only allow for one survivor. In this situation, even if the designated survivor doesn’t receive the maximum survivor benefit, the rest cannot be awarded to anyone else, even a future surviving spouse. Alternatively, FERS and CSRS with the federal government will allow the survivor benefit to be divided between multiple survivors, so long as the total benefit amongst the survivors does not exceed the maximum benefit allowed.

3.    Does the plan have a remarriage restriction? If you represent the alternate payee, it is important to note if there is a possibility of losing the survivor benefit upon the alternate payee’s remarriage, or remarriage before reaching a certain age. Specifically with FERS and CSRS, if the survivor remarries before reaching age 55, the survivor benefit may be lost. Similarly, in some plans if the survivor’s second marriage ends then the survivor benefit may be reinstated.

Using these considerations, and others, you might discover that a negotiation over the survivor benefit, at least from your client’s perspective, might not be worth the current expense, and therefore could be an easier concession to make, and the energy can be focused somewhere it will benefit your client more. It is for this reason, that we suggest obtaining the plan documents and considering the plan specific rules while drafting a settlement agreement, rather than waiting to draft the QDRO until after the divorce.