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Below are some common questions and answers regarding the TRF retirement benefit and divorce.
Does TRF accept QDROs?
A Qualified Domestic Relations Order (QDRO) is defined by the Employee Retirement Income Security Act (ERISA) as a domestic relations order that “creates or recognizes the existence of an alternate payee's right to receive, or assigns to an alternate payee the right to receive, all or a portion of the benefits payable with respect to a participant under a pension plan, and that includes certain information and meets certain other requirements.”
Many Indiana courts will attempt to use QDROs to order a member to pay a portion of the member’s TRF retirement benefit to the member’s ex-spouse; however, TRF is exempt from QDROs. Pension plans that are subject to ERISA must recognize QDROs if they meet the criteria listed in 26 U.S.C. § 414(p), but TRF is a governmental plan as defined in 29 U.S.C. § 1002(32). Pursuant to 29 U.S.C. § 1003(b)(1), the provisions of ERISA do not apply to governmental plans.
In December 1989, the Indiana Office of Attorney General issued an opinion confirming that TRF is exempt from QDROs. (The statute quoted in the memorandum has been recodified at Indiana Code § 5-10.4-5-14.) Everette v. Everette, 841 N.E.2d 210 (Ind. Ct. App. 2006), also affirms that Public Employees’ Retirement Fund benefits are exempt from QDROs under a similar statute.
In addition, Indiana pension law exempts TRF benefits from legal process, seizure, or levy. Because a member’s transfer of payment is void by statute, TRF will not pay alternate payees. Therefore, a QDRO that is addressed to TRF will be returned to the sender. This applies to both the monthly pension and the Annuity Savings Account portions of the TRF retirement benefit.
To be consistent with Indiana pension law, divorce decrees should order the member, or the member’s legal beneficiary, to make payments to the member’s ex-spouse, rather than ordering TRF to make such payments. If a divorce decree or QDRO has been issued that orders TRF to assign a portion of the member’s TRF retirement benefit to the member’s ex-spouse, the member should consult an attorney to seek a modification of the order.
Can I withdraw my Annuity Savings Account (ASA) before retirement to pay my ex-spouse?
Before a member can withdraw the member’s ASA, there must first be a qualifying event: retirement, retirement for disability, termination of TRF and/or PERF covered employment and suspension of TRF membership, or death. A member must be eligible for early or normal retirement to begin receiving a TRF retirement benefit. This applies to both the pension and Annuity Savings Account (ASA) portions of the TRF retirement benefit.
If a member is not vested (has less than 10 years of service credit) and wishes to withdraw the member’s ASA, the member must first terminate employment in a covered position and suspend the member’s TRF membership. The member may then take a lump sum distribution of the member’s ASA. If the member later wishes to return to covered service and have any prior service credit reinstated, the member must return to covered service and remain employed for at least six months.
If a member is vested (has at least 10 years of service credit) and wishes to withdraw the member’s ASA without forfeiting the member’s pension, the member must separate from covered employment for at least 30 days after the date the member terminates employment. During the separation period, the member must not perform service in a covered position or have an agreement in place with the employer with which the member has terminated. At the end of the separation period, the member may withdraw the ASA balance as a lump sum without forfeiting a future pension benefit.
If I must divide my pension benefit with my ex-spouse, who pays the tax on my ex-spouse’s portion?
Because TRF cannot pay alternate payees, the member will receive a 1099-R for the full amount of the member’s annual benefit. A member may account for this in the member’s divorce property settlement agreement by lowering the amount paid to the member’s ex-spouse to offset the tax consequence to the member. For more information, members should consult an attorney or tax professional.
If I become divorced after retirement, can I change my designated beneficiary?
Ordinarily, a member’s benefit election is irrevocable once the member retires and begins receiving a TRF retirement benefit. However, if a member becomes divorced after retirement, the member may change the form of benefit and survivor beneficiary, provided the member’s divorce decree does not preserve an interest in the member’s TRF retirement benefit for the ex-spouse or prohibits the member from making changes. A post-retirement change to the member’s benefit election could cause the member’s TRF retirement benefit amount to decrease. A member who is contemplating a post-retirement change of benefit election should request an updated benefit estimate from TRF.
If I leave my ex-spouse as my designated beneficiary with TRF, but my divorce decree dissolves any interest my ex-spouse has in my TRF benefit, who will get the death benefit if I die?
Indiana law is quite clear: A member’s designated beneficiary of record has a vested legal right to a member’s death benefit on the date of the member’s death. Therefore, TRF will only pay the designated beneficiary on file with TRF, regardless of the content of a member’s divorce decree. Settlement agreements between the member and a third party have no effect upon this distribution.
 29 USC § 1056(d)(3)(B)(i) (2010)
 IC § 5-10.4-5-14(a)
 IC § 5-10.4-5-14(b)
 IC § 5-10.2-4-2
 IC § 5-10.4-5-1
 IC § 5-10.2-3-6; 550 IAC 2-3-1
 IC § 5-10.2-3-7.5; IC 5-10.2-3-7.6; IC 5-10.2-3-8; IC 5-10.2-3-9; 550 IAC 2-6-1
 IC § 5-10.2-4-1
 IC § 5-10.2-3-5
 IC § 5-10.2-3-6
 550 IAC 2-3-2; 550 IAC 2-3-3
 IC § 5-10.2-3-6.5(a)
 IC § 5-10.2-4-8(f)
 IC § 5-10.2-3-6.5(f)
 IC § 5-10.4-5-14
 IC § 5-10.2-4-7(d)
 IC § 5-10.2-4-7.2(g)