Dividing LACERA Benefits in a Divorce
When a marriage ends in California, all marital property is subject to equitable distribution between the spouses, including retirement benefits such as those provided by LACERA (Los Angeles County Employees Retirement Association). Dividing LACERA benefits requires a specialized court order called a Domestic Relations Order (DRO), which directs LACERA to divide the pension benefits between the divorcing spouses. This article will explore the key aspects of dividing LACERA benefits in a divorce, including the plan’s administration, division options, and the DRO process.
Plan Administration and Key Considerations
LACERA is a pension system that provides retirement, disability, and death benefits to eligible employees of Los Angeles County. With over 160,000 active members, LACERA administers a large public employee pension plan. The plan is governed by the California Public Employees’ Retirement Law (PERL) and is regulated by California Family Code 2610, which treats pension benefits as community property in a divorce (California Legislative Information).
LACERA Plan Structure
LACERA provides both Defined Benefit and Defined Contribution plans to its members. The Defined Benefit Plan (Tier 1 and Tier 2) provides a retirement benefit based on factors like years of service, final compensation, and age at retirement. The Defined Contribution Plan allows members to contribute to an investment account, with retirement benefits depending on the amount contributed and the performance of the investments.
Since LACERA is a governmental pension plan, it operates under different rules than private-sector retirement plans. As a result, it does not use Qualified Domestic Relations Orders (QDROs), which are typically used for private retirement accounts like 401(k)s or IRAs. Instead, LACERA requires a Domestic Relations Order (DRO) to divide pension benefits in a divorce (LACERA Member Handbook).
Division Options Under LACERA
When dividing LACERA benefits, there are a few methods to ensure that both parties receive their fair share of the pension. The most common method for dividing LACERA benefits is through the Time Rule Formula.
Time Rule Formula
The Time Rule Formula divides the LACERA pension benefits based on the amount of service credit earned during the marriage. Here’s how it works:
Formula:
Months of service during marriageTotal months of service at retirement\frac{\text{Months of service during marriage}}{\text{Total months of service at retirement}}Total months of service at retirementMonths of service during marriage x Total monthly pension benefit = Nonmember spouse’s share of the benefit.
For example, if a member worked for 20 years, but 10 years of those years were during the marriage, the nonmember spouse would be entitled to 50% of the member’s pension earned during the marriage.
It’s important to note that LACERA pension benefits cannot be divided directly into separate accounts as they would be in private retirement plans. Instead, the nonmember spouse typically receives their portion of the benefits once the member begins receiving their pension payments.
The DRO Process for LACERA
A DRO is a specialized court order that directs LACERA to divide the retirement benefits. The DRO must comply with LACERA’s guidelines and be submitted to the plan administrator for approval. Here are the general steps involved in the DRO process:
- Drafting the DRO
- A family law attorney or a QDRO attorney will typically draft the DRO. The DRO must meet LACERA’s specific requirements and clearly define how the benefits will be divided.
- LACERA Review and Approval
- Before submitting the DRO to the court, it’s essential to submit the DRO to LACERA for review. LACERA will ensure the DRO complies with the pension plan’s rules.
- Court Approval and Signature
- After LACERA has reviewed and approved the DRO, it is submitted to the court for judicial approval. The judge will sign the order if it meets all legal requirements.
- Submission to LACERA
- After the court approves the DRO, a certified copy of the signed order is submitted to LACERA for implementation.
- Division of Benefits
- Once the DRO is processed, LACERA will begin to divide the pension benefits according to the order. Payments to the nonmember spouse can begin when the member starts receiving retirement benefits.
Key Considerations When Drafting the DRO
When drafting a DRO for LACERA, there are several critical factors to keep in mind:
- Survivor Benefits:
If the member has selected a retirement option that provides survivor benefits, the DRO should specify how those benefits will be allocated between the parties. - Loans and Withdrawals:
If the member has any outstanding loans from their LACERA account, the DRO should address how these will be handled. Generally, loans are not shared with the nonmember spouse but should be accounted for in the division process. - Arrears:
If the member has already begun receiving benefits, the DRO may include provisions for arrears (past-due payments) owed to the nonmember spouse.
Tax Implications:
The division of retirement benefits may have tax implications for both parties. It’s important to consult with a tax advisor to understand how the division of pension benefits will affect your overall tax situation.
Get Legal Assistance for Your LACERA DRO
Dividing LACERA pension benefits in a divorce can be a complex process, and it’s essential to have a qualified attorney guiding you through the DRO process to protect your financial interests. At Peacock Law, we specialize in Domestic Relations Orders (DROs) for CalPERS, LACERA, and other public employee retirement systems. Our experienced attorneys will work with you to ensure that your pension benefits are divided fairly and in accordance with the law.
Contact us today at peacockesq.com to schedule a consultation. Let us help you protect your future and navigate the complexities of dividing retirement assets in your divorce.
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Attorneys & Staff
William "willie" peacock, Esq.
Willie is an attorney licensed to practice in California since 2011. He has since added admissions in Missouri, New York, New Jersey, Iowa, Kansas, Connecticut, and North Dakota.
He was born and raised in Missouri, went to high school and college in California, and returned there after attending the prestigious Washington and Lee University, School of Law in Lexington, Virginia. He relocated to New York and relaunched his law firm in 2018, focusing exclusively on retirement—estate planning and division of retirement accounts through qualified domestic relations orders (QDROs).
He has written for Thomson Reuters, Clio, and California Lawyer, and his writings have been cited by the American Bar Association, Above the Law, and other leading legal publications.
He is currently rated a perfect 10.0 by Avvo.com, and more importantly, has a perfect 5-star rating from his past clients on all major review sites.
