QDRO Corner: Montgomery County Public Schools Employees’ Pension System

Last month we discussed the Maryland State Retirement Pension System (“MSRPS”), which in summary, is available for employees of the State of Maryland.

Employees of the Montgomery County Public School System (“MCPS”) have interest in a second pension system, the Montgomery County Public Schools Employees’ Pension System. To our knowledge, Montgomery County is the only county in Maryland that provides a second pension to employees such as teachers who are participants in the MSRPS.

Some teachers aren’t aware these are two separate plans, and will reference that they have “a pension” as a part of their retirement. If you have a case involving an employee, specifically a teacher, in MCPS, be sure to request all relevant documentation, including pay stubs, to determine whether this party is participating in both plans. Both plans require mandatory contributions, and therefore deductions will appear on the paystub. Eligibility is based on a multitude of factors, but for the most part any permanent (non-temporary) MCPS employee anticipated to work more than 500 hours in their first year of employment will be in both plans.

The two plans have different names, different rules, and different administrators. Therefore, one domestic relations order cannot divide both plans – if your case requires both plans to be divided, you will need two domestic relations orders. In addition, both plans should be addressed separately in any settlement agreement or judgment of divorce. Attorneys Jessica Markham and Leslie Miller litigated this issue in the Montgomery County Circuit Court in 2018.  If you have a dispute about these plans, or need orders drafted, we can prepare them, consult with you or provide expert testimony if needed.

QDRO Corner: Maryland State Retirement Pension System

Most employees of the State of Maryland have an interest in the Maryland State Retirement Pension System (“MSRPS”) for their retirement. The MSRPS consists of multiple retirement plans each with their own name and rules, including two for teachers (and participation is based on employment start date), one for the judiciary, and others for correctional officers and other state employees. 

Since the MSRPS consists of multiple named plans, any domestic relations order being submitted to the MSRPS must state the name of the specific plan in which the employee participates. Failure to do so will result in a rejection of the domestic relations order. Some of these plan names are quite similar. For example, the Teachers’ Pension System and the Employees’ Pension System. To make matters more confusing, teachers in Maryland depending on their exact circumstances could be eligible for participation in either of these plans – meaning, that just because there’s an MSRPS pension in your case and that party is a teacher, it doesn’t necessarily mean the person is a participant in the Teachers’ Pension System.

The participant should receive annual statements from the plan. In the event the participant says they don’t get these statements – there’s an online portal for them to log-in and download it. This statement includes a lot of good information, including the name of the specific plan, the plan entry date, the hire date, the creditable service, and an estimate of the retirement benefit. Be sure to request this documentation in discovery to be fully informed regarding this benefit not only for any settlement discussions, but to facilitate the drafting of the domestic relations order.

What is Coercive Control?

Many people are familiar with the phrase domestic violence but may be less familiar with the phrase coercive control. Put simply, coercive control describes patterns of abuse that are subtle but can be as harmful as physical violence and verbal abuse. Many victims and survivors of coercive control may develop mental health issues as a result of the abuse.

Coercive control may look and feel different in every relationship and family. Abusers who engage in coercive control may use threatening and intimidating behavior to exercise power and control over their spouse, children, and family members. Some examples of coercive control include, but are not limited to: 

• Isolating the spouse from his or her family and friends

• Limiting the spouse’s access to marital funds and financial information

• Closely monitoring the spouse’s whereabouts or daily routines

• Closely monitoring the spouse’s phone activity and social media accounts

• Humiliating the spouse, including name-calling

• Damaging the spouse’s belongings or home

• Threatening violence against the spouse’s family or friends

Where the abuser and primary victim have children, it is unlikely that those children remain unaffected. This impact occurs even when the abuser intends no harm to the children. Children who witness coercive control in their parents’ relationship may feel scared, distressed, anxious, or distrustful of their parents. Some children feel pressured to take sides and feel responsible for their parents’ conflicts. Other children may feel obligated to take care of the abused parent, which may alternate the parent-child dynamic. Witnessing coercive control in their parents’ relationship has the potential to create substantial psychological issues in children.

If you are searching for compassionate legal representation in your separation or divorce, please reach out to Markham Law Firm at 240-396-4373 to schedule a consultation. 

QDRO Corner: Military Orders – When You Need Additional Information

Representing military service members can come with a lot of extra considerations, only one of which is the division of any disposable retired pay. Depending on the service member’s service record, date of entry, and duty status, you might want to include additional information in your Agreement to make sure all information is obtained before signing.

Specifically, for a service member who is not yet retired nor receiving disposable retired pay, the Order must include the service member’s high-3 and years of creditable service (or creditable reserve points). It’s best to obtain this information while still negotiating the agreement, or in your discovery requests if in litigation.

To determine the service member’s high-3, you’ll need to know the pay grade for the highest 36 consecutive months during the marriage and date of entry.

To determine the amount of creditable reserve points earned, the service member can download a statement reflecting not only the amount of points earned each year, but the specific dates on which the service member performed the drills to earn those points. This detailed statement is especially helpful if the service member earned points prior to the marriage that should not be included in the division to determine the former spouse’s share.

If in litigation, you should request this information in your discovery requests, and if negotiating, you should request it in informal discovery.

In contrast, if the service member is already in pay status, then you don’t need to obtain the information listed above.

Have additional questions about military orders as it relates to a QDRO? Contact our office at 240-396-4373.

QDRO Corner: FERS Disability Retirement

Last month we discussed the military pension disability retirement – this month we will focus on the FERS disability retirement, for all the federal government employees we represent.

Unlike with the military pension, there is some negotiating that can happen with respect to FERS disability pensions. First though, how FERS disability works. The employee receives the greater of their regular FERS annuity or a percentage of their high-3 average salary less a percentage of their social security disability benefits (see OPM publication for more information regarding the calculation). 

At age 62, the employee’s annuity is automatically recalculated to be as if the employee continued working until the day before their 62nd birthday, including an extension of their service time and cost of living adjustments applied to their salary computation during the time that the employee was received disability benefits.

The FERS disability benefits received prior to age 62 are divisible by Court Order and there are points to negotiate on this. Specifically, how the former spouse’s share of the pension should be calculated during the period that the employee is receiving disability benefits. If the Court Order states the award to the former spouse as a portion of the employee’s annuity without any specific distinction for disability benefits then the former spouse will receive a share of the payments actually made by OPM to the employee.

Alternatively, the Court Order could state that the former spouse’s share can be defined that if disability payments are made, the former spouse’s share shall be calculated as if the employee is paid their full FERS benefit.

Since the employee’s benefit could be reduced based on the amount of social security benefits while receiving FERS disability, this could be a financially important distinction for the former spouse. While such a division would likely result in a larger reduction to the funds received by the employee while on disability, the employee will receive social security benefits, which are non-divisible.

QDRO Corner: Military Disability Retirement

Here in the DMV, we represent a large amount of military service members. As such, we see the military pension (disposable pay) frequently, along with military disability pay. Military disability is paid through the Department of Veterans Affairs and is not taxable income and is not divisible in a divorce.  

This is an important distinction not because there is anything that can be done about it when negotiating a settlement, but to set good expectations for your client. When a military member is receiving regular disposable pay and has a disability rating that makes them eligible for disability pay, it is solely the member’s option whether to receive the funds as disposable pay or disability pay. This option cannot be waived by the member in a separation or divorce agreement.

If the member has a disability rating less than 50%, the only way to receive disability is to waive an equal amount of disposable retired pay, i.e.: the member will receive the same amount of gross funds each month, but the amount that is disability will not be taxed, therefore netting a larger amount. This decision impacts the former spouse because the member can decide to receive disability pay, thereby increasing their own income by avoiding taxes, and lowering the former spouse’s income by decreasing the amount of disposable retired pay available for division. Note, there is no way to draft around the member’s option – the only way to try to equalize is to take from a different asset.

If the member has a disability rating of 50% or higher, they may be eligible for Concurrent Retirement and Disability Pay. This program allows eligible members to receive their full disposable pay, as well as disability pay without waiving any of the disposable pay.  

The amount of disability received from the Department of Veteran’s Affairs can change based on periodic re-evaluations. If the disability rating changes, the amount of disability received will likely change. The amount of disability received will only change if the disability rating changes.

Stay tuned for next month’s QDRO Corner about FERS disability pay for federal government employees!  

QDRO Corner: A Military Special Rule

The Military has a special rule which dictates when the Department of Finances and Account Service (“DFAS”) or any other pay center may make payments of disposable retired pay (the military pension) to a former spouse. This rule is generally known as the 10/10 rule. This rule states that the parties must have been married for at least ten years, overlapping with at least 10 years of the service member’s service – all in order for the former spouse to be eligible for payments of disposable retired pay as a division of property directly from DFAS.

It is very important to note here that whether a former spouse is entitled to a portion of disposable retired pay as a division of property is a matter of state law. If the parties have not been married for at least 10 years but the former spouse is to receive a portion of the disposable retired pay either by court order or agreement of the parties, then those payments will have to be made by the service member directly to the former spouse.

Senate Bill 41/House Bill 132: Putting Minors in Charge of Their Mental Health Treatment

During the 2021 session, the Maryland Legislature passed Senate Bill 41/House Bill 132, which lowers the age at which minors may seek emotional health care without a parent or guardian’s consent. The law went into effect October 1, 2021.

The law allows minors 12 to 16 to seek mental and emotional health treatment without the permission from their parent or guardian. The law requires that the child may only receive treatment if the child is deemed to be mature enough to seek the treatment. The health care provider, from who the minor is seeking the treatment, decides whether the child is mature enough or not. The law only recognizes heath care providers as those who are (1) licensed under the Health Occupations Articles; and (2) are acting within the scope of the individual’s license to diagnose and treat mental and emotional disorders. This specification limits whom a child may seek out for treatment.

It can be difficult for parents or guardians to relinquish control over their child’s health treatment, whether mental or physical, and because of that the law has some safeguards built in for them. Regardless of child consent, the law provides that parents or guardians may be informed of their child’s care plan, so no one is kept completely in the dark. Most importantly, the law does not allow children under the age of 16 to be prescribed psychiatric medication without parent or guardian permission. Although in these instances it is in the hands of the minor to seek out the treatment, parents can still be involved.

What this law seeks to accomplish is clear. The law presents an opportunity to struggling youth to access the treatment they need when they feel they cannot ask a parent or guardian for it. The law especially allows greater access to mental health treatment for those children who are struggling with things they are not comfortable exploring with their parent or guardian, such as LGBTQ+ issues, abusive relationships, or uncomfortable family situations.

There is some concern, however, giving so much responsibility to minors in this age group. It may be difficult for these minors to determine whether the treatment or therapy approach suggested is appropriate for them. Additionally, another issue arises in how these services will be covered when the minor is likely on a parent’s insurance or does not have the fiscal means to cover this treatment themselves.

The law on its face and what it seeks to accomplish is a great aid for struggling minors. The law could really support a child going through a parent’s separation or custody battle help themselves. The law, however, may have a serious impact on the parents or guardians in cases involving legal custody disputes and selection of therapy because the it puts the choice in the hands of the child.

QDRO Corner: Describing the Amount to Transfer to the Alternate Payee

A necessary element of any QDRO is the amount that the Plan should pay to the
Alternate Payee. The amount is described one way for defined benefit plans (pensions,
annuities, etc.) and another way for defined contribution plans (401k, 403b, TPS, etc.).

Defined Contribution Plans

Defined contribution plans have separate accounts that hold funds designated for a
single, specific person. The transfer amount should be described in terms of a specific
dollar figure or a percentage of the total account balance, as of a specific date. All other
considerations, such as a premarital interest, using the retirement accounts to equalize
or buy-out interest is other assets, etc. should be described in detail within the
Agreement, and ultimately boiled down to a specific dollar amount or percentage to be
used within the QDRO.

Exception: The Federal Thrift Savings Plan is an exception here, as this plan will also
accept awards described as a percentage of the account accumulated between two
dates. This description allows attorneys to divide the TSP on its own, and have the TSP
Board do the math to avoid dividing any premarital or post marital contributions.

Defined Benefit Plans

Defined benefit plans are large funds in which many people have an interest, but funds
are typically not set aside or designated for a single person. Awards to an alternate
payee for these plans should be described as either a flat dollar amount, a percentage
of payments received, or as a fraction.

It is important to keep in mind here that these plans are typically monthly benefits and
many have provisions limiting how much of the benefit can be given to an alternate
payee. So, if using a flat dollar description, it is important to know how much the
participant is receiving, and if there a restriction.

Exception: There are cash-balance defined benefit plans. These plans are a sort of
hybrid between a traditional defined benefit plan and a traditional defined contribution
plan. Some are divided using a defined benefit structure and others are divided using a
defined contribution structure.

At the end of the day, it’s important to know what type of plan is being divided to know
how to describe the award to the alternate payee in a way that the plan will accept. To
do this, it is best to obtain the information regarding the plan during negotiation of the
agreement and to prepare the QDRO along with the Agreement.

We can help with obtaining information from the plan, reviewing draft agreement
language, and preparing QDROs while the agreement is being negotiated.  Contact our office at 240-396-4373.

QDRO Corner: ERISA and Pensions in Pay Status

It is best practice to submit a QDRO as soon as possible following a divorce for many reasons. In the case of the alternate payee of a pension that’s already being paid out to the retired participant, the number of reasons increase. The sooner the QDRO is accepted and processed by the plan, the sooner the alternate payee can receive their share directly from the plan – or start receiving their share at all if the retired participant isn’t making payments to the alternate payee in the meantime.

The Employee Retirement Income Security Act (ERISA) contemplated this situation and includes provisions to protect the funds for the alternate payee. Once a draft QDRO is submitted to a pension plan that is already making payments to a retired participant, the plan is required to withhold the amount of funds awarded to the alternate payee. This withholding will last for a period of 18 months or until receipt of a final, court-executed QDRO is accepted by the plan, whichever first occurs. If the 18 months expires and no final order is received, the withheld funds will be paid to the retired participant. If a final order is received and accepted by the plan, the withheld funds will be paid to the alternate payee according to the provisions in the final court order.

Therefore, the best way to preserve the alternate payee’s share of a pension which is in pay-status is to submit a draft order to the plan right away, even if the terms may change between the draft and the final order.