Wash. Admin. Code § 415-02-540

Current through Register Vol. 24-23, December 1, 2024

Section 415-02-540 - How can my Plan 3 retirement account be split[1] by a property division dissolution order?

(1)Who may use this section? You may use this section if:

(a) You are a member of TRS Plan 3, SERS Plan 3 or PERS Plan 3;

(b) You have enough service credit to receive a defined benefit payment when you meet the age requirement for your system; and

(c) You have or will have a property division dissolution order or amendment dated on or after July 1, 2003². If your ex-spouse will be receiving an interest in your account, use WAC 415-02-530.

(2)What are the rules for splitting my account? If you and your ex-spouse are eligible, the department will split both portions of your retirement account (defined benefit and defined contributions) into two separate accounts - one for you, and one for your ex-spouse. The rules for splitting your account are different depending on whether your dissolution order or most recent amendment is dated before or after retirement.

(3)How will the defined benefit portion of my retirement account be affected if the department accepts the property division dissolution order BEFORE I retire?

(a) The department will split your defined benefit account into two completely separate accounts and create an account for your ex-spouse for the amount awarded in the defined benefit portion of the dissolution order under your ex-spouse's Social Security number.

(b) The department will pay each of you a defined benefit, when eligible, out of your separate accounts.

(c) The amount awarded to your ex-spouse as his or her defined benefit payment will be a permanent reduction to your defined benefit payment amount.

(d) Your defined benefit payment will be payable over your lifetime, and your ex-spouse's defined benefit payment will be payable over his or her lifetime.

(e) You will have the right to pick a survivor option for your defined benefit payment for your own account.

(f) Your ex-spouse will not have the right to pick a survivor option for his or her defined benefit payment but may name a beneficiary to receive any final death payment that may be due.

(g) You may begin receiving your defined benefit payment when eligible according to the rules for your system.

(h) Your ex-spouse may begin receiving monthly payments when he or she reaches age 65, or the first day of the month following the department's acceptance of the order, whichever is later. Your ex-spouse must apply for retirement according to the rules for your system and plan. Your age or retirement eligibility has no effect on when your ex-spouse is eligible to begin receiving his or her monthly benefit.

(i) When you or your ex-spouse dies, there will be no impact to the other person's retirement account, because the accounts are independent from one another.

(4)What happens to my defined benefit if my account was split and then I retire early?

(a) If you are eligible and decide to retire early, or must retire early because of a disability, your monthly retirement benefit payment will be reduced by an early retirement factor (ERF). See WAC 415-02-320.

(b) To determine the reduction to your benefit because of your preretirement split (see subsection (3)(c) of this section), the adjustment to the amount awarded to your ex-spouse in the dissolution order will be reduced by the ERF used to reduce your benefit.

Example: You are a member of TRS Plan 3 and retire for disability five years before you are eligible for a service retirement. The dissolution order awarded your ex-spouse a monthly benefit of $250.

Your defined benefit before ERF is applied:	$1,000
ERF (factor for retiring two years early)	0.61
Your base benefit:	$610	($1,000 x 0.61 ERF)
Adjustment for divorce split:	-$152.50	(ex-spouse's $250 x 0.61 (ERF))
The defined benefit you will receive:	$457.50	($610 - $152.50)
Your ex-spouse will receive the full monthly amount ($250) that was awarded to him or her in the dissolution order, regardless of your benefit amount.

(5)What language must be used in a property division dissolution order that the department accepts BEFORE I retire to pay a portion of my monthly defined benefit payment to my ex-spouse? The order must use the language provided below. Do not use the language in RCW 41.50.670(2). The exact dollar amount of your ex-spouse's defined monthly benefit payment must be specified. Do not use formulas or percentages.

The Department of Retirement Systems (department) shall create a defined benefit monthly account for _________ (ex-spouse) in the ________ (name of retirement system and plan). When _______ (ex-spouse) becomes eligible for monthly payments, he (upon application) will begin to receive $ ____ per month for the remainder of his/her lifetime. When _______ (member) becomes eligible for monthly payments, he (upon application) will begin to receive the calculated monthly benefit less the amount herein specified for _______ (ex-spouse). This provision shall become effective as soon as administratively possible after the department's acceptance of the order.

(6)If ordered in the dissolution order, how will the department split my preretirement defined contribution account?

(a) The amount the dissolution order awards to your ex-spouse will be deducted from your defined contribution account and set up in a separate account for your ex-spouse under his or her Social Security number. Upon acceptance of the order, the department will affect the transfer of the specified amount as soon as administratively possible. The amount in your ex-spouse's separate account will be subject to market gains and losses after the transfer.

(b) You and your ex-spouse will manage your separate accounts independently from one another.

(c) You must continue to contribute to your account during your employment.

(d) Your ex-spouse may not contribute to his or her account.

(7)What options does my ex-spouse have in managing his or her separate defined contribution account? Your ex-spouse may:

(a) Transfer money between investment programs (state-managed (WSIB) or self-directed (SELF)); and

(b) Transfer money among the investment options in the SELF-directed program.

(8)How will the department make distributions to my ex-spouse and me out of our defined contribution accounts?

(a)You must be separated from employment before funds in your account can be distributed according to your distribution choice.

(b)Your ex-spouse may begin receiving distribution of the funds in his or her account at any time according to his or her distribution choice.

(c) Both you and your ex-spouse will have the same distribution options as outlined in WAC 415-111-310.

(d) If you die before a distribution has been made from your defined contribution account, your beneficiary(ies) must apply for a lump sum death benefit from your account.

(e) If your ex-spouse dies before a distribution has been made from his or her account, your ex-spouse's beneficiary(ies) must apply for a lump sum death payment from his or her account.

(f) If you die after you begin receiving funds but before the funds in your account have been exhausted, the balance will be paid to your designated beneficiary(ies).

(g) If your ex-spouse dies after receiving funds but before the funds in his or her account have been exhausted, the balance will be paid to your ex-spouse's designated beneficiary(ies).

(9)What language must be used in a property division dissolution order to award a portion of my defined contribution account to my ex-spouse? The order must include the language provided in the following paragraph. The exact dollar amount to transfer to your ex-spouse's defined contribution account must be specified. Do not use formulas or percentages. (See example in WAC 415-02-500(14)(b)).

The Department of Retirement Systems (department) shall split _______ (member's) defined contribution account in the ________ (name of retirement system and plan) and create a separate account for _______ (ex-spouse). The amount of $ _____ (amount) shall be transferred from ________'s (member's) defined contribution account to_________'s (ex-spouse's) new account. This provision shall become effective as soon as administratively possible after the department's acceptance of the order.

(10)Can my entire defined contribution account balance be awarded to my ex-spouse? Yes, using the language provided in the following paragraph:

The Department of Retirement Systems (department) shall transfer (member's) entire defined contribution account in the (name of retirement system) to a separate account for (ex-spouse). This provision shall become effective as soon as administratively possible after the department's acceptance of the order.

(11)Can I amend an existing order that has awarded an interest in my account to my ex-spouse under WAC 415-02-530 and remove my ex-spouse as my survivor beneficiary? Yes. To remove your ex-spouse as your survivor beneficiary, you must submit a "conformed copy" of the court order splitting your account. A conformed copy is a copy of the order that has been signed by the judge or commissioner on or after July 1, 2003, and filed with the court. Removing your ex-spouse as survivor beneficiary will change your retirement benefit. See WAC 415-02-540(9) and (14) for the language that must be used.

Example:

Julio and May were married when Julio retired. Julio chose survivor Option 2 (joint and 100 percent survivorship) when he retired. This meant that if Julio died, May would receive monthly survivor benefits. Two years after Julio's retirement, the couple divorced. The court awarded " 100 percent of retirement benefits" to Julio. Julio later learned that this award did not change the survivor option. Julio can return to court and obtain an order stating that May is to receive "$0" as the dollar amount for her separate monthly benefit. The order must use the language in WAC 415-02-540 and be signed by the court no sooner than July 1, 2003.

(12)If the dissolution order or amendment is dated AFTER my retirement, how will my defined monthly retirement benefit payment be split?

(a) The department will split your defined monthly retirement benefit payment only if you selected your ex-spouse to receive a survivor benefit at the time you retired. If you did not select your ex-spouse to receive a survivor benefit at the time you retired, you cannot use this section. You must use WAC 415-02-530.

(b) If you selected your ex-spouse to receive survivor benefits at the time you retired, the rules in subsection (3)(a) through (f) of this section will apply.

(c) At the time the department splits your account, your ex-spouse will be removed as the survivor beneficiary on your account.

(d) Regardless of his or her age, your ex-spouse will begin receiving a monthly benefit payment the first month after the department accepts the property division dissolution order.

(13)If the dissolution order or amendment is dated AFTER my retirement, how will my monthly retirement benefit be calculated after the split?

(a) The dissolution order must state the exact dollar amount your ex-spouse is to receive as his or her separate monthly benefit. The following describes how the new amount of your benefit will be calculated assuming your ex-spouse was awarded a monthly benefit of $600 in the dissolution order.

Step 1

The department will determine the single life benefit of your current monthly benefit payment by dividing your currently monthly benefit payment by the survivor option factor (see WAC 415-02-380) in effect at the time of the split.

Example:

Currently monthly benefit = $1200

Option factor = 0.865

Single life benefit amount = $1200/0.865 = $1387.28

Step 2

The single life benefit ($1387.28) is divided by your annuity factor (see WAC 415-02-340) to determine the current present value of the single life benefit amount. The annuity factor the department uses is the factor for your age as of the date of the split.

Example:

Your age at time of the split = 61 years old

Annuity factor for age 61 = 0.0065448

Present value of single life benefit = $1387.28/0.0065448 = $211,966.75

Step 3

The department then determines the present value of your ex-spouse's share by dividing your ex-spouse's monthly benefit amount (as awarded in the dissolution order) by your ex-spouse's annuity factor. The annuity factor is the factor for your ex-spouse's age as of date of the split.

Example:

Ex-spouse's monthly benefit amount = $600

Ex-spouse's age at time of the split = 67

Annuity factor for age 67 = 0.0076715

Present value of your ex-spouse's monthly benefit =$600/0.0076715 = $78,211.56

Step 4

Next, the department subtracts your ex-spouse's present value from the single life benefit present value. The result is the present value of the benefit you will receive.

Example:

Present value of single life benefit = $211,966.75

Less present value of ex-spouse's benefit = -78,211.56

Your present value = $133,755.19

Step 5

The department determines your new monthly benefit amount by multiplying your present value by your annuity factor.

Example:

Your present value = $133,755.19

Annuity factor = 0.0065448

Your new monthly benefit amount = $133,755.19 x 0.0065448 = $875.40

(b) The department determines the percentage of the total present value each of you will receive by dividing each of your present value amounts by the single life benefit present value amount.

Example:

Your percentage of the single life benefit present value: $133,755.19/$211,966.75 = .6310

Your ex-spouse's percentage of the single life benefit present value:

$78,211.56/$211,966.75 = .3690

(14)What language must the postretirement property division dissolution order or most recent amendment include to split my monthly defined benefit payment with my ex-spouse? Do not use the language in RCW 41.50.670(2). The order must include the language provided in the following paragraph. The exact dollar amount of your ex-spouse's monthly benefit payment must be specified. Do not use formulas or percentages. (See example in WAC 415-02-500(14)(b).

The Department of Retirement Systems (department) shall create a defined benefit account for ________ (ex-spouse) in the ________ (name of retirement system and plan) and pay him or her $ ___ (amount) for his or her life. To pay for this benefit, _______ (member's) monthly defined benefit payment will be reduced for life. This provision shall become effective as soon as administratively possible after the department's acceptance of the order.

(15)How will the department split my postretirement defined contribution account? If your defined contribution account has not been fully disbursed at the time of the dissolution order, the department will split the remaining portion of your defined contribution according to the provisions of subsections (6) through (9) of this section.

(16)Is there a maximum payment that a property division dissolution order can award to my ex-spouse? Yes. See RCW 41.50.670(4) and WAC 415-02-500(10) for information.

(17)Terms used:

(a) Department's acceptance - A dissolution order that fully complies with the department of retirement systems' requirements and chapter 41.50 RCW.

(b) Dissolution order - RCW 41.50.500.

(c) Ex-spouse - WAC 415-02-030.

(d) Split accounts - WAC 415-02-030.

(e) Survivor benefits - WAC 415-02-030.

(f) Plan 3 retirement systems - WAC 415-111-100.

(g) TRS - Teachers' retirement system. Footnotes to section:

¹ When a court splits your retirement account, the department will establish a separate account for your ex-spouse. Once the account is established, your account and your ex-spouse's account are not tied in any way.

² If an ex-spouse was not listed as the member's survivor beneficiary at retirement, then no postretirement property division order (or postretirement amendment) may split the member's retirement account using WAC 415-02-540.

Wash. Admin. Code § 415-02-540

Amended by WSR 23-01-003, Filed 12/7/2022, effective 1/7/2023

Reviser's note: The brackets and enclosed material in the text of the above section occurred in the copy filed by the agency and appear in the Register pursuant to the requirements of RCW 34.08.040.

Statutory Authority: RCW 41.50.050(5), 41.50.500,[41.50.]670 et seq., [41.50.]790. 03-24-049, §415-02-540, filed 11/26/03, effective 1/1/04. Statutory Authority: RCW 41.50.050(5), 41.50.500, [41.50.]670-[41.50.]710, [41.50.]790 and 2002 c 158. 03-12-014, §415-02-540, filed 5/27/03, effective 7/1/03.

Reviser's note: The brackets and enclosed material in the text of the above section occurred in the copy filed by the agency.