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Bar News - September 16, 2015

Opinion: Clarification for QDROs: Shared Interest or Separate Interest?


I have drafted hundreds of Qualified Domestic Relations Orders (QDROs) for attorneys and mediators throughout United States – primarily in New Hampshire.

A QDRO is a court order that divides a retirement plan pursuant to a divorce, awarding the former spouse a portion of the participant’s benefit in the plan. In my opinion, the drafters of divorce decrees need to understand the differences between awarding a portion of a defined benefit pension plan as a “shared interest” or as a “separate interest.” The divorce decree needs to be specific as to which type should be used in the QDRO.

For the purposes of this commentary, when I refer to “shared interest,” I am referencing the interest as it applies to a participant who has not yet retired. (Note: shared interest is the only option for a participant who has already retired.) In a shared interest award, the participant and former spouse, referred to as the “alternate payee,” begin receiving benefits simultaneously. The participant controls the timing of the benefits awarded to the alternate payee. The participant may delay retiring and, therefore, temporarily prevent the former spouse from receiving a benefit. Conversely, the participant may choose to retire early and thus the amount of the benefit to the alternate payee is substantially reduced. If the alternate payee dies first, the awarded benefit could revert back to the participant.

Some participants resist accepting that a pension plan is marital property. I know of a former client who is still working beyond normal retirement age because this will delay the award to the former spouse.

If survivor benefits are not clearly indicated in the divorce decree, all benefits to the former spouse could end, in the event the participant dies first.

A problem for all shared interest awards is that the participant often cannot be found. Although the divorce may state that the participant must inform the alternate payee of impending retirement, often communication ends years before the participant retires. Unless the alternate payee is diligent in keeping the retirement plan administrator informed of address changes, the awarded benefit may not be received as planned.

I recommend using a “separate interest” for the award to a former spouse whenever possible. (Note: New Hampshire Retirement System, as well as some other state and federal plans, only approve “shared interest” orders.) In a separate interest award, the alternate payee controls when benefits begin; and, because the payments continue for the alternate payee’s lifetime, only pre-retirement survivor benefits need to be addressed in the divorce.

The parties do not need to communicate further with one another once the Separate Interest QDRO has been completed. They can move on with their lives and put their divorce behind them.

The Hodgins formula can be adapted to apply to either shared interest or separate interest QDROs. Although originally meant to divide a participant’s benefit using the benefit amount at the participant’s retirement, both the benefit amount and the percentage can be modified in the divorce as needed. (Note: The Hodgins formula should not be used for a defined contribution plan division, such as a 401(k) or 403(b)).

Sample: The standard Hodgins formula is as follows:

Data: Years of marriage up to the date of filing for the divorce = 20, Total years worked at retirement for the Participant = 40, Final retirement benefit = $5,000 per month.

Step 1: 20/40 = .5
Step 2: .5 x $5,000 = $2,500
Step 3: $2,500 x 50% = $1,250

This is the amount to be paid to the former spouse each month at the time of the participant’s retirement.

I hope that readers handling divorce cases find this commentary useful. Please email questions or comments to A guide to QDROs is available on my website,

Bonne A. McHenry is a QDRO consultant and author of “A Guide for Divorce Attorneys and Mediators.”

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