New Mexico Educational Retirement Board

INTRODUCTION

ERA has prepared this package to assist you and your attorney in drafting an acceptable Court Order to divide retirement benefits due to a divorce. We have attached a sample Model Order to these Instructions for your convenience.

NOTE: IT IS RECOMMENDED THAT YOU RETAIN COUNSEL TO ASSIST YOU IN PREPARING AN ORDER TO DIVIDE YOUR RETIREMENT BENEFITS DUE TO A DIVORCE OR A PENDING DIVORCE. ERB CANNOT PROVIDE YOU WITH LEGAL ADVICE. THESE INSTRUCTIONS AND SAMPLE MODEL ORDER ARE IN NO WAY TO BE CONSTRUED AS SUCH LEGAL ADVICE.

ERA is a defined benefit plan, governed by the Educational Retirement Act, NMSA 1978, §§ 22-11-1, et seq., hereinafter “the Act.” In a defined benefit plan, retirement benefits are paid when certain eligibility requirements (such as age and service credits or a combination thereof) are met by the member. An employer affiliated with ERA must deduct employee contributions each pay period from each employee-member.

The primary ERA benefit is a monthly pension that may be paid to a member for normal or disability retirement. Other possible benefits include a pension that may be paid under certain circumstances to a beneficiary upon a member’s death. Also, a member may, after termination with all ERB employers, request a refund of contributions paid by the employee into the plan. The model order will assist you in providing a division of any of these benefits.

ERA is a “governmental plan” for the purposes of 29 USC § 1002, and is therefore exempt from the provisions of the federal Employees Retirement Income Security Act of 1974 (ERISA) and the Retirement Equity Act of 1984. Thus an ERISA “Qualified Domestic Relations Order” (QDRO) is not appropriate to divide the community interest in ERA benefits. Rather, the court order, regardless of its title must be consistent with the Educational Retirement Act.

The Model Order and Instructions are designed to help you comply with the Act and can be used either pre- or post retirement. The Model Order provides alternatives for the parties to select preretirement choices under the plan.

In cases where the member has already retired and is receiving monthly benefits, NMSA 1978, § 22-11-29 and §22-11-30 control the choice of form of payment and any named pension survivor beneficiary and §22-11-29 prohibits changing the form of payment or beneficiary after the effective date of retirement.

ERA CAN ONLY DIVIDE THE COMMUNITY INTEREST IN RETIREMENT BENEFITS WHEN THE PENSION, REFUND DISABILITY OR DEATH BENEFITS ARE OTHERWISE PAYABLE ACCORDING TO THE TERMS OF THE ACT. IF A MEMBER IS NOT ELIGIBLE TO RETIRE AT THE TIME OF DIVORCE, HAS NOT TERMINATED EMPLOYMENT AND REQUESTED A REFUND, OR IS NOT RECEIVING DISABILITY BENEFITS, ERA CANNOT PAY THE NONMEMBER SPOUSE HIS OR HER INTEREST IN THE RETIREMENT ACCOUNT AT THAT TIME.

No benefits can be divided unless ERA is served with an appropriate court order. Upon receipt of such an order, and a written determination by ERA counsel that the order complies with ERA statutes and rules and is administratively feasible, ERA will pay the ex-spouse his or her share at such time as the benefits are otherwise distributed to the member under the plan.

PLEASE BE AWARE THAT THE ALTERNATIVES PROVIDED IN THE MODEL ORDER, INCLUDING HOW THE COMMUNITY PROPERTY IS TO BE DEFINED AND DIVIDED ARE SIMPLY SUGGESTIONS’. ERA IN NO WAY ENDORSES ONE ALTERNATIVE OVER ANOTHER, NOR DO THESE SUGGESTIONS PRECLUDE OTHER ARRANGMENTS. HOWEVER, TO BE ACCEPTED, THE ORDER MUST COMPLY WITH ERA STATUTES AND RULES AND BE ADMINISTRATIVELY FEASIBLE.

Note: If your retirement benefits are to remain your sole and separate property after a divorce, you must supply ERB with such a statement either in an endorsed Marriage Settlement Agreement or by separate Order. Parties are encouraged to prepare a draft order dividing ERA benefits for informal pre-approval prior to submitting the order to the court for signature. ERB Legal Division is available to assist parties in determining acceptability of these orders prior to submission to the court. To inquire further about these instructions and the model order, please contact ERB’s legal department at (505) 827-8030.

INSTRUCTIONS:

The following is an explanation of the various paragraphs presented in the Model Order. Not all paragraphs are necessary. However certain information must be included for an order to be acceptable. Such minimum requirements are set forth in the checklist that follows these instructions.

Paragraph 1 - informs ERA that this order divides retirement benefits under the Act. Parties must be divorced or legally separated for this order to be acceptable under ERA statutes.

Paragraph 2 - identifies the member spouse (hereinafter “the member”) whose account is the subject of division by the court order. State warrants (checks) will generally not be issued without the payee’s name, social security number and address.

Paragraph 3 - identifies the nonmember spouse (hereinafter “the CO-payee”). As with the member, the order must include the CO-payee's name, social security number and address.

Paragraph 4 - provides a means for updating the information without amending the order. A party must inform ERA of any address change so that they may receive their share of the benefits when paid. It is not possible, nor is it ERA’s responsibility to search for payees who have moved without notifying ERA. If the warrant is returned as undeliverable, the money will accumulate in the member’s account until claimed and a current address furnished. No member or CO-payee will be entitled to interest on the payments if ERA was not properly informed of their address change.

Paragraph 5 - identifies the dates of marriage and divorce. This helps to determine the community interest in the ERA account.

Paragraph 6 - specifies the community interest in the member’s account. The most common determination of the community interest is defined as that portion of the benefits that was earned during the marriage as stated in this paragraph. PLEASE NOTE THAT ERA UNDERSTANDS THAT THERE ARE NUMEROUS CHOICES OR METHODS FOR DEFINING AND CALCULATING THE COMMUNITY INTEREST IN A MEMBER’S ACCOUNT. ERA is also aware that parties dividing marital property in a divorce may trade parts or all of one asset for another. Also, it is very important to understand that the property division methods included in this Model Order do not determine the actuarial present value of a member’s retirement account. If the parties require an actuarial present value of an ERA account, they may need to hire a private actuary. ERA can provide public information contained in its records, but cannot provide actuarial evaluations. Alternative 1 is designed for use when the member has not yet retired and the community interest percentage of the gross benefits or contributions cannot be determined because the gross benefit is unknown at the time of divorce. Alternative 2 can be used if the member has already retired .

Paragraph 7 – divides the community interest in the retirement benefits or contributions as calculated by paragraph 6. “Benefits” refers to pensions paid at retirement and “contributions” refers to money paid into the fund by the member before retirement, plus applicable interest. If the parties decide that the member will keep their retirement benefits or contributions as their sole and separate property, the Order or Marital Settlement Agreement should specifically state this so ERA will know that there would likely be no claim on the member’s account. Alternative 1 defines the parties’ percentage interest in the community portion of the gross benefits and awards the remainder to the member. Alternative 2 divides the member’s gross benefits by percentage, regardless of the community property portion of the benefits. Alternative 3 divides the benefits by assigning a fixed monthly amount to one spouse (usually the nonmember) and the remainder to the other. Note that this method does not allow the fixed monthly amount spouse to benefit from any cost of living increases that may occur over time.

Paragraph 8 – identifies the form of payment of retirement benefits. The forms of payment (e.g., normal or survivor benefits) are described in NMSA 1978, §22-11-29 and §22-11-30. This section offers five alternatives regarding the selection of a retirement benefit form of payment. It is strongly recommended that both parties and their attorneys consult with the ERA benefits office regarding the effects of each form of payment before choosing one of these alternatives. Alternative 1 is for use if the member has not yet retired and plans to choose the normal option, naming the CO-payee as the refund beneficiary. Alternative 2 is similar, except it allows the member to choose someone other than the CO-payee as the refund beneficiary. Alternative 3 is for use when the member has not yet retired and wishes to choose either option B or C under NMSA 1978, §22-11-29 and will choose the CO-payee as the survivor beneficiary. Alternative 4 is similar to alternative 3, except that instead of the entire survivor amount going to the CO-payee who is the Option B beneficiary, the survivor benefit is divided between the CO-payee and the member’s estate. Alternative 5 allows the member to choose any form of payment under the plan and name any survivor beneficiary, including a child or some person with a mental or physical handicap and provides that all benefits to the CO-payee shall cease if CO-payee predeceases the member or named survivor beneficiary. Alternative 6 is similar to 4 except that it provides that the CO-payee's share be paid to the CO-payee's estate after their death, as long as benefits are still being paid on the member’s account.

Paragraph 9 - determines what happens to the CO-payee's share if they predecease the member and/or the member’s refund beneficiary. In Alternative 1, the CO-payee's share returns to the member or the member’s designated refund beneficiary. Alternative 2 provides that the CO-payee's share will go to the CO-payee's estate as long as benefits are still being paid on the account. Use this paragraph, unless you have chosen alternative 5 in paragraph 8. Also, make sure that this paragraph is consistent with your selection in paragraph 8.

Paragraph 10 – must be included if the parties want ERA to divide the benefits and pay each party separately . ERA cannot do this without a direct court order.

Paragraph 11 – for use only if the parties stipulate that the member will choose the normal option upon retirement, or if the member has already retired under the normal option. This language is not appropriate for any form of payment that calls for a survivor pension beneficiary.

Paragraph 12 – prevents a member who has terminated ERA employment from withdrawing his or her contributions without the other party’s receiving their portion of the contributions. If a refund of contributions is made, the service credit supported by those contributions is forfeited and may not later be included in retirement benefit calculations unless the member repays the contributions plus interest. This paragraph should always be included if the member has not yet retired at the time of the divorce. ERA cannot divide a member’s refund of contributions and pay the CO-payee his or her share without a specific restraint in a court order. If the member has already retired, no refund is payable and this paragraph should not be used.

Paragraph 13 – protects the CO-payee's interest in the member’s retirement account in the event of the member’s death before retirement. NMSA 1978 Section 22-11-29 addresses provisions regarding survivor pension benefits for members who die before retirement. There is no provision ordering the CO-payee to be considered the surviving spouse in case of the member’s death while still in the employ of an ERA affiliated employer. However, the named beneficiary as defined in NMSA 1978, §22-11-2(e) is defined as “a person having an insurable interest in the member’s life.” NMSA 1978, §22-11-29 allows a member to designate a survivor pension beneficiary if the member should die while in the employee of and ERA affiliated employer. Parties who have agreed that the member will elect a payment under Option B or C with the CO-payee as the survivor beneficiary will probably also want to stipulate that the member will designate the CO-payee as survivor beneficiary as defined in NMSA 1978 §22-11-29 (D).

Paragraph 14 – provides that the CO-payee is to receive their portion of any disability benefits paid under the member’s account.

Paragraph 15 – provides that any taxes due on benefits or contributions paid by ERA will be paid by each party when the benefit or contribution is received according to the withholding information on file with ERA. ERA, upon receipt if a “tax deduction” form, will withhold federal and state income taxes from pension payments. If the parties agree that one or the other will be responsible for all taxes due, this paragraph must be modified accordingly. All members employed and contributing to ERA before 1983 have contributions that were taxed. The amounts of these contributions must be assigned. The language of the model order assigns them in accordance with the formula that defines the community property share.

Paragraphs 16 & 17 – are self-explanatory.

Paragraph 18 – reserves the court’s jurisdiction to amend that portion of the order relating to retirement benefits or contributions. It is not a general reservation of jurisdiction since such a reservation would affect the order’s finality and, therefore, its appeal.

Please note that the order uses the terms “the member” and “the CO-payee” to identify the parties. You may use “Petitioner” and “Respondent” to identify the parties throughout the order as long as the parties are clearly and correctly identified.

Note that if both spouses are ERA members, a separate order should be prepared for each member regarding the division of their retirement benefits.

CHECKLIST

At a minimum, to be acceptable, the order MUST include the following:

* A statement that the Order divides retirement benefits under the Educational Retirement Act, NMSA 1978, §§ 22-11-1 et seq.;
* The name, social security number, current address of each party;
* Instructions on ERA notification in case of either party’s address or name change. ERA requires such notice, in writing and signed before a notary public;
* A declaration of a community interest in the member’s retirement benefits and a clear, legal and administratively feasible method to divide the member’s benefits;
* The percentage or dollar amount of each party’s interest in the member’s contributions;
* A direct order to ERA to issue separate warrants (checks) for each party
* A statement of each party’s federal tax liabilities

Please call us at (505) 827-8030 if you have any questions.

Thank you for your cooperation.

To access the Model Order form with Attorney instructions please click - here.

How to Divide NMERB Benefits

INTRODUCTION

INSTRUCTIONS:

CHECKLIST