Divorce and Your Retirement Account
For most members of the Texas Municipal Retirement System (TMRS®), their accumulated benefit is one of the most valuable assets that they own. It is very important that any divorce decree involving a member of TMRS specifically state to whom that benefit is awarded, or how it is to be divided.
Texas courts have held that the portion of a person’s retirement benefit earned during marriage is “community property” - property owned by both the husband and the wife, regardless of who “earned” that benefit. Since the portion earned during marriage is community property, a divorce decree or other domestic relations order must state whether the benefit is retained by the member or divided between the member and spouse. If the decree or order does not do either, the courts have held that the former husband and wife continue to jointly own that portion of the benefit earned during marriage. An order silent on the issue can create a serious problem for a member at retirement or when a refund is requested. The member may need to go back to court and obtain the proper orders, or promptly reach an agreement with a former spouse.
Value of the Retirement Account
TMRS cannot provide a determination of the value or present value of an account or benefits. Note that such a determination is not needed for the division of the benefit. The value of a TMRS member’s account will depend in part on timing and on decisions made by the member. For example, if a member terminates employment immediately after the divorce and applies for a refund of the accumulated deposits and interest, then those amounts fairly represent the account value. However, if a member stays in the System until retirement, the value of the account may be much larger, since deposits and interest will continue over the member’s career. For this reason, if you or your attorney wish to obtain a valuation of the account, you must consult with a private actuary or other expert who can provide advice or testimony on the matter.
TMRS can only provide the member’s current account balance and the total deposits and interest earnings accumulated during the marriage.
Requests for Account Information
To obtain information on a your account or benefits for divorce proceedings, you or your attorney must submit a signed written request by mail or fax identifying you by name and Social Security number, your current mailing address and phone number, the dates of the marriage, and what information you are requesting. If your attorney is submitting the request on your behalf, he or she should include a statement of representation and State Bar number along with the cause number assigned to the suit.
Benefits do not have to be Divided
TMRS does not require that benefits be divided. If the parties agree (or the court decides) that the member will retain the entire benefit, no QDRO is necessary. Instead, specific language should be placed in the divorce decree to inform TMRS of that decision. This may be the result of a “trade off” between husband and wife regarding other assets. Appropriate language to award the member 100% of the benefit must be inserted into the Decree of Divorce. The Family Practice Manual published by the State Bar of Texas sets forth the following language for use when the member retains the entire retirement benefit earned during the marriage. It constitutes a correct method for awarding the member the entire benefit (earned during the marriage) as long as no other provision of the decree, or order, is in conflict.
(NAME) is awarded any and all sums, whether matured or unmatured, accrued or unaccrued, vested or otherwise, together with all increases thereof, the proceeds therefrom, and any other rights related to any profitsharing plan, retirement plan, pension plan, employee stock option plan, employee savings plan, accrued unpaid bonuses, or other benefit program existing by reason of (NAME)’s past, present, or future employment.
Qualified Domestic Relations Orders (QDROs)
TMRS is a public retirement system and is governed by state law. The division of benefits under a QDRO for a TMRS member is determined under the provisions of the TMRS Act (Title 8, Subtitle G, Texas Government Code), Texas general law for QDRO’s (Chapter 804, Texas Government Code), and the Administrative Rules of TMRS (Title 34, Chapter 129, Texas Administrative Code).
The purpose of a Qualified Domestic Relations Order is to permit a retirement system to make direct payment to a non-member of the system. Because of the way TMRS calculates and pays benefits, orders that divide those benefits need to follow a special format correctly and completely, informing TMRS how the benefit — whether a refund or an annuity — is to be divided. This division can occur only under a court order known as a “Qualified Domestic Relations Order” (QDRO, pronounced “QUADRO”). The term “Qualified Domestic Relations Order” is often confusing, since the words “qualified” and “order” may appear in the heading of an order that is not qualified. A “domestic relations order” is any judgment, decree, or order, which relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependant of a member or retiree, under domestic relations law, including a community property law of the State of Texas or of another state. The order is a qualified order only when it has been approved by TMRS as meeting all requirements of applicable law and rules. The “alternate payee” is the person, usually a former spouse, who is designated by the QDRO to receive a portion of the benefit.
State law requires that TMRS receive a certified copy of any domestic relations order relating to the division of benefits. The certified copy will be retained by TMRS. A certified copy is one that bears the original stamp and seal of certification, followed by the signature of the clerk of the court in which the divorce was heard. A photocopy or fax of the order is not acceptable.
No Immediate Payment or Segregation
A QDRO does not entitle either the TMRS member or the alternate payee to withdraw any part of a TMRS account immediately after the divorce. Furthermore, a QDRO does not allow an amount awarded to an alternate payee to be segregated into a separate account, even if the alternate payee is also a TMRS member.
When Benefits are Paid
When a QDRO is on file with TMRS, the retirement benefit is not distributed either to the member or to the alternate payee until one of two things happens.
- The member terminates covered employment and applies for a refund of his or her TMRS deposits. In this case, the alternate payee will receive a one-time lump-sum payment (refund).
- The member becomes eligible to retire, terminates employment and chooses to retire and receive a retirement benefit. In this case, the alternate payee will also receive a monthly retirement payment, payable for their lifetime. The alternate payee can choose to receive a portion of the retirement benefit as a lump-sum payment. Determinations of these amounts cannot be made until the member applies for retirement.
When either of these events occurs, and with a qualified order on file, TMRS will contact the alternate payee to complete the applications required to receive a benefit.
TMRS Divorce and Retirement Publication
TMRS strongly recommends you review the TMRS Divorce and Retirement Publication. The publication will help members of TMRS (as well as others who may have an interest in a member’s TMRS benefits) understand the nature of that benefit, how it is determined and paid, and how it may be awarded to the member or may be divided upon divorce. Of course, TMRS cannot give legal advice to the parties to a divorce; the parties need to consult with their lawyers for such counseling.
After reviewing the publication, if you have questions or concerns, contact the TMRS Support Services Department:
- Texas Municipal Retirement System PO Box 149153 Austin, TX 78714-9153
- Fax: (512) 476-5576
- By Form: Contact TMRS (Use the contact form for general questions about your TMRS benefits. Do not send sensitive information, such as your Social Security number, to us through email or this form.)