WRS has formal rules regarding divorce settlements. WRS requires a Qualified Domestic Relations Order (QDRO) signed by a judge to split your retirement benefit between you and your former spouse. If your former spouse is awarded a percentage of your benefit, your monthly retirement benefit will be reduced for your lifetime, even if your former spouse elects to be paid in a lump sum.
A separate QDRO, signed by a judge, is required to pay any portion of a WRS 457 Plan account to an alternate payee.
Qualified Domestic Relations Orders
In the case of a divorce, W.S. 9-3-426 provides the authority to pay retirement benefits to a former spouse (alternate payee) in accordance with a qualified domestic relations order (QDRO). A QDRO is an order, filed with the court, awarding the alternate payee a specific percentage of a member’s account, as of a specific date. The alternate payee also receives interest, earnings, dividends, stock splits, benefit increases or other appreciation or depreciation in that share to the date of distribution. If you divorce after you have already started your retirement benefit, your named beneficiary under some retirement payout options cannot be changed, depending on your plan. In these cases, your original beneficiary will receive the benefit.
The Wyoming Retirement Board has established rules relating to QDROs that outline the minimum requirements needed for qualification. A sample QDRO with board-approved language is available. A separate QDRO is required to divide assets in the WRS 457 Deferred Compensation Plan.
The Deferred Compensation “Plan Document” outlines the minimum requirements needed for qualification; a sample QDRO for Deferred Comp is provided as well. WRS encourages the use of these sample documents.
The alternate payee may take either a lump sum payment or a monthly retirement benefit based on the amount awarded. If the alternate payee takes a lump sum payment, he or she forfeits the right to any further benefits from WRS. As shown in the examples, the member’s benefit will be permanently reduced even if the award is paid out in a lump sum; the member does not have the option to redeposit any withdrawn funds paid to an alternate payee.
The alternate payee may leave the funds on deposit and receive a monthly retirement benefit upon the member’s retirement or separation from service, only if the member is eligible for retirement benefits. To be eligible, a member must terminate employment with all covered agencies of WRS and meet the minimum age and vesting requirements based on his or her specific retirement plan.
The alternate payee cannot leave the awarded funds on deposit if the member has terminated employment and initiates the process to begin receiving retirement benefits.
A disbursement must be made to the alternate payee immediately, either in a lump sum payment or a monthly retirement benefit. Benefits are paid according to the amount, type, form, and options otherwise available under the retirement system. Joint survivor benefit options are not available to an alternate payee.
If the alternate payee dies before retirement benefits have begun, all benefits awarded revert to the member; the alternate payee does not have the option to designate a beneficiary.
A benefit based on a medical or disability retirement cannot be divided unless the member is of retirement age.
If a QDRO is received before the member retires, the alternate payee’s monthly benefit will be calculated based on the alternate payee’s life expectancy. If the QDRO is received after the member has already started receiving benefits, the alternate payee’s benefit may stop at the member’s death, depending on the benefit option the member selected at retirement.
HAS = Highest Average Salary
MOS = Months of Service
Joe was married for 10 years. His HAS during the marriage was $20,000. His ex-wife was awarded 50 percent of his benefit accrued during the marriage. Joe worked another 10 years and is retiring at age 60 with a HAS of $40,000.
Joe’s monthly benefit will be reduced by $177.08.
Instead of receiving $1,437.50 per month, Joe will receive $1,260.42 per month.
If Joe’s ex-wife left her percentage on deposit, she will receive a lifetime benefit of $177.08 per month. This amount will be actuarially reduced if she is younger than Joe.
Kathy was married for six years. Her HAS during the marriage was $25,000. Her ex-husband was awarded 35 percent of her benefit accrued during the marriage. Kathy worked another 15 years and is retiring at age 60 with a HAS of $50,000.
Kathy’s monthly benefit will be reduced by $92.97. Instead of receiving $1,890.63 per month, Kathy will receive $1,797.66 per month.
If Kathy’s ex-husband left his percentage on deposit, he will receive a lifetime benefit of $92.97 per month. This amount will be actuarially reduced if he is younger than Kathy is.
Frank was married for 20 years. His HAS during the marriage was $50,000. His ex-wife was awarded 50 percent of his benefit accrued during the marriage. Frank worked another eight years and is retiring at age 60 with a HAS of $65,000.
Frank’s monthly benefit will be reduced by $885.42. Instead of receiving $3,310.94 per month, Frank will receive $2,425.52 per month.
If Frank’s ex-wife left her percentage on deposit, she will receive a lifetime benefit of $885.42 per month. This amount will be actuarially reduced if she is younger than Frank.
Retired Example 1:
Joan retired in 2005 under Option 1, with a monthly benefit of $2,000. Option 1 provides a lifetime benefit for Joan. A QDRO was filed in 2006 awarding Joan’s ex-husband 50 percent of Joan’s benefit.
Both Joan and her ex-husband will receive $1,000 per month for Joan’s lifetime. Because Joan’s benefit was calculated based on her life expectancy only, her ex-husband’s benefit will stop at her death.
Retired Example 2:
Fred retired in 2000 under Option 2, with a monthly benefit of $2,000. Option 2 provides a lifetime benefit for both Fred and his beneficiary; Fred’s wife was designated as his beneficiary. A QDRO was filed in2006 awarding Fred’s now ex-wife 50 percent of his benefit.
Both Fred and his ex-wife will receive $1,000 for Fred’s lifetime. At Fred’s death, his ex-wife will receive the entire benefit of $2,000 for her lifetime. Since Fred’s benefit was calculated based on both his and his ex-wife’s life expectancies, Fred cannot change his beneficiary. If Fred’s ex-wife dies before Fred, the benefit will stop at Fred’s death, even if he has remarried.