CalPERS Retirement System – Sacramento Attorney – Free Lawyer Consultation

CalPERS Retirement System

The  CalPERS Retirement System is more formerly known as the California Public Employees’ Retirement System (CalPERS).  This agency is part of the California executive branch and is responsible for the management of pensions and health benefits for California public employees, retirees, and their families.  As part of the divorce process, all community assets are divided, this includes the vested amount that one spouse may have in a CalPERS pension.   Your pension can be divided using the following methods known as Model A, Model B, and Model C.

Model A

CalPERS Retirement System Model A is used to separate the account of a Member who is not retired.  The member’s contributions, interest, and service credit are divided into two individual accounts based on a court order.

• Both parties then each have a separate and distinct account.
• Once CalPERS has separated the account, the nonmember spouse no longer relies upon the member to determine when benefits become payable.
• The nonmember spouse may choose to receive a refund of the accumulated contributions while the member continues to work.
• Should the nonmember elect to refund, they have the right to withdraw, by direct refund or rollover, the contributions and interest credited to their nonmember account, plus interest earned at 6 percent per year through date of payment.
• The taxable portion of the benefit would be subject to 20 percent federal withholding, unless it is rolled over to an IRA.
• If the member was not vested on the date of dissolution or dies prior to reaching the minimum retirement age, the nonmember’s only right would be to withdraw their contributions by a direct refund or rollover.

CalPERS members under State Miscellaneous/Industrial Second Tier did not make any contributions to CalPERS prior to July 1, 2013.  In the case where State Second Tier members have made no contributions, no contributions are available for refund.  A nonmember spouse could receive a monthly allowance, when eligible, but only if the member was vested on the date of the dissolution of marriage and once both parties reach the minimum retirement age.  If the member dies prior to reaching the minimum age requirement, no monthly allowance will be payable.

If the member is vested on the date of dissolution, the nonmember spouse has the right to receive a monthly allowance from their own account, independent from the member’s account, when both parties reach retirement age.  The monthly allowance payable to the nonmember spouse is based on the service credited to their account, their age at the time of retirement, and the salary (final compensation) the member earned prior to the date of dissolution of the marriage.

If the nonmember spouse chooses to withdraw the contributions and interest credited to their account, the member has the right to purchase that service credit and redeposit those contributions, plus interest, to restore the service credit and contributions to the account.  The member must make any such election to redeposit the contributions and service prior to retirement.  If, however, the nonmember spouse chooses to leave the funds on deposit or if they elect to receive a monthly allowance, the member cannot purchase the contributions and service credit transferred to the nonmember spouse’s account.

After a separation of accounts occurs, the benefits payable to the member at retirement or payable upon the member’s death prior to retirement are based on the actual service credit and/or contributions remaining in the member’s account.

Model B

CalPERS Retirement System Model B divides benefits for Members who are not retired according to the “time rule formula.”

The time rule formula is commonly used in divorce cases to calculate the portion of the member’s retirement benefits that the nonmember spouse is to receive.  Members can use this formula before they begin to receive a retirement benefit or while receiving a retirement or disability benefit.

The court must specify the time rule formula in the judgment.  The judgment should also contain the dates of marriage and separation of the parties.

The following is an example of the time rule formula:

[Retirement Benefits] X [Member’s credited service in the System from date of marriage until date of separation] / [Member’s total credited service in the System] X [50%] = [Nonmember Spouse’s System Interest]

When using the time rule formula to divide a benefit, it is very important that the language in the court order be specific regarding the following key elements:

• Member Dies Before Former Spouse
• Former Spouse Dies Before Member
• Court-Ordered Election of an Option
• Lump-Sum Death Benefit
• Payment By Separate Warrant

Model C

CalPERS Retirement System Model C divides the benefits for retired members only according to the “Time Rule Formula.”  The time rule formula is commonly used in divorce cases to calculate the portion of the member’s retirement benefits that the nonmember spouse is to receive.  Members can use this formula before they begin to receive a retirement benefit or while receiving a retirement or disability benefit.

The court must specify the time rule formula in the judgment.  The judgment should also contain the dates of marriage and separation of the parties.

The following is an example of the time rule formula:

[Retirement Benefits] X [Member’s credited service in the System from date of marriage until date of separation] / [Member’s total credited service in the System] X [50%] = [Nonmember Spouse’s System Interest]

When using the time rule formula to divide a benefit, it is very important that the language in the court order be specific regarding the following key elements:

• Member Dies Before Former Spouse
• Former Spouse Dies Before Member
• Court-Ordered Election of an Option
• Lump-Sum Death Benefit
• Payment By Separate Warrant

Member Dies Before Former Spouse

The court order should be specific regarding what happens if the member should die before the nonmember spouse dies.  If the member dies before the nonmember spouse, under the time rule formula the nonmember spouse’s benefits terminate, unless the member elected an option providing the nonmember spouse a continuing benefit for their lifetime.

Former Spouse Dies Before Member

The court order should be specific regarding what happens if the nonmember spouse dies before the member.  If the nonmember dies before the member, but after CalPERS has paid benefits, the nonmember spouse’s share will automatically continue to the nonmember’s beneficiaries for the member’s lifetime, unless the court specifically provides that the nonmember’s share reverts to the member or in the event that the beneficiary designated by the nonmember disclaims their share.  The former spouse must provide the name of the beneficiary(ies) in writing to CalPERS as soon as possible after the marriage dissolution.

Court-Ordered Election of an Option

The court order should be specific regarding an election of an option to determine whether the nonmember spouse’s community property share terminates or continues after the member’s death.

An option is a reduction of the highest benefit, which is referred to as the Unmodified Allowance, that provides a lump-sum payment or monthly benefit to one or more beneficiaries in the event of the member’s death.  The cost of the reduction depends on which option is applied in the settlement.  Please review your pertinent member benefit publication for further information about options.

Both the member and nonmember spouse can share the cost of selecting an option settlement, or the court may require that only one party bear the cost of the selected option.  For example, if the unmodified benefit is calculated to be $500 per month, and the election of Option 4 for the nonmember spouse reduces the benefit to $475 per month, the cost, $25, may be applied against the member’s portion of the retirement benefit, the nonmember spouse’s share of the benefit, or both.

Lump-Sum Death Benefit

The court order should be specific regarding any lump-sum death benefits payable.  The nonmember spouse is entitled to a community property share of any lump-sum amount payable upon the member’s death. CalPERS calculates this amount using the method stated in the court order.

Payment by Separate Warrant

In the event that the court directs that the community property interest in the retirement benefit must be divided, the court order must specifically state whether CalPERS should pay the nonmember spouse “by separate warrant.”

Without such language in the court order, the member will be responsible for ensuring that the nonmember spouse receives proper payment.

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Retirement Plans – Sacramento Attorney – Free Lawyer Consultation