Pension, Divorce and Government or Public School Teachers Plans

Key Points

Some government employees and public school teachers offer benefits to the alternate payee throughout the lifetime of the participant. The alternate payee’s benefits cease upon the participant’s death unless he or she is specifically designated as a beneficiary of a survivor annuity.
A life insurance policy may ease a financial burden of the alternate payee once the pension benefits cease.

These plans apply to employees of the state and local governments or public school teachers throughout the country:

Examples: Connecticut State Employees Retirement System, District of Columbia Police Officers & Fire fighters Retirement Plan, New Jersey Teachers Pension & Annuity Fund.

When a Domestic Relations Order is drafted, monthly benefits will commence to the Alternate Payee when the Participant retires, and continue for the lifetime of the Participant. Under some plans, the Alternate Payee may be designated as the beneficiary of a survivor annuity under a specific benefit option. The benefit option must be specified in the order, otherwise, typically all payments to the Alternate Payee cease upon the Participant's death.

Some Key Facts to Remember:

Some plans will only pay a benefit to an Alternate Payee for as long as the Participant is alive. This should be investigated with the plan.

If benefits are only payable for the lifetime of the Participant, a life insurance policy may be an appropriate tool to ensure that the Alternate Payee receives benefits for his/her lifetime.

Information Provided by: Pension Appraisers, Inc.

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WIFE’S DISADVANTAGE -- Women of all ages often go into divorces on a less equal footing than their husbands and, therefore, must pay particular attention to the long-term consequences of the division of the marital estate. Women may enter and leave the work force to the demands of child rearing, which lowers their contribution to their own pension plans (if they have them), and they may, for the same reason, juggle low-paying, part-time jobs that together yield a living wage but one without benefits and certainly no pension.

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