What is the “maximum” survivor benefit?
Each retirement plan has its own rules and terminology. It’s important to know what each word means to each plan. For example, the word “maximum” means the most or the highest amount allowable. So an award of the “maximum” survivor benefit should be clear – the largest survivor benefit allowable under the plan.
Is this what the parties or the court mean to award the former spouse? For example, under the military pension plan, the “maximum” survivor benefit provides up to 55% of the service member’s monthly benefit. The former spouse cannot receive more than 55% of the service member’s monthly benefit during the service member’s lifetime, so in this case, the former spouse would be receiving a windfall should they outlive the service member.
Other institutions in the DC area, such as the World Bank, have a pension plan that includes a 50% survivor benefit at no cost to the employee. However, the employee can purchase a larger survivor benefit, up to 100% of the entire pension benefit. What does “maximum” mean in that case? Is it the largest possible survivor benefit that comes at no cost to the parties, or the largest possible survivor benefit regardless of the cost? Again, the consideration of a windfall to the former spouse upon the employee’s death is an issue.
Knowing how the plan defines terms is key to ensuring the retirement order is drafted and interpreted as the parties intend. Alternatively, if obtaining such information is not possible, being more descriptive in the settlement agreement language will also reach the same goal. Click here to contact our office or call us at 240-396-4373 if you need assistance in reviewing plan documents to figure out their terms.
