When dividing a Defined Benefit Plan (Pension) in a divorce case, the QDRO can be drafted using either a “Shared Interest” approach or a “Separate Interest” approach. The main difference between the two is that Separate Interest is based on the Alternate Payee’s lifetime and Shared Interest is based on the Participant’s lifetime. Below are some pros and cons of each approach:


•   Adjusts the amount of the award to be paid over the lifetime of the Alternate Payee rather than the Participant’s lifetime.
•   “Post-retirement” survivorship language for the benefit of the Alternate Payee is not required, because he or she is automatically guaranteed a lifetime of actuarially-adjusted benefits.
•   It is still necessary to include “pre-retirement” survivorship language to secure the Alternate Payee’s right to benefits in the event of the Participant’s death before retirement.
•   The Alternate Payee can choose to begin receiving benefits at a different time than the Participant.
•   If the Alternate Payee is much younger than the Participant, this approach is not favorable.
•   If the Alternate Payee predeceases the Participant, the benefit may revert back to the Participant or just disappear.


•   Benefits are adjusted over the lifetime of the Participant.
•   Must have pre- and post-retirement survivor language in the QDRO to secure the benefit for the Alternate Payee in the event that the Participant dies first.
•   Only method allowed if the Participant has already retired.
•   In the event that the Alternate Payee predeceases the Participant, the benefit reverts back to the Participant (if allowed by the plan).
•   Participant must begin receiving benefits before the Alternate Payee may receive benefits.
•   If the Alternate Payee is younger, he or she will receive more benefits using this method since the benefit is actuarially based on the Participant’s life expectancy.

Property settlements should spell out the terms of the division of the pension. It is not uncommon to see agreements containing clauses such as “the pension will be divided between the parties.”  Unless survivorship issues are agreed upon and put into the agreement, it is likely that one may be forced to use the Separate Interest approach, which may not be consistent with best interests.

SOURCE: DivorceNet