Divorce and IPERS Benefits
Qualified Domestic Relations Orders (QDROs) |
|
 |
|
|
|
About the IPERS Plan
 The IPERS Plan is a defined benefit plan. The benefit you receive is defined; it's calculated using a formula. As your years of service and salary increase, your IPERS benefit grows too. You can receive a lifetime, monthly benefit at retirement. Dividing such a benefit can be tricky, and involves more complexity than dividing accounts maintained under defined contribution plans, such as IRAs or 401(k) plans.
IPERS is a governmental pension plan exempt from ERISA, the federal law that governs the division of pension benefits for private sector plans. IPERS’ QDRO requirements are different from those of ERISA-mandated plans, so even attorneys familiar with QDROs for private sector plans must know and follow the IPERS QDRO rules.
The IPERS Plan vs. Defined Contribution Plans:
What’s the Difference?
| |
The IPERS Plan |
Defined Contribution Plans |
|
The IPERS Plan is a defined benefit plan. Defined benefit plans are sometimes called traditional pension plans. |
401(k) and 403(b) plans are types of defined contribution plans. The amount contributed to the plan is defined, but your benefit at retirement is not. The sponsor of the plan may or may not contribute to your account balance. |
| Guaranteed Benefit |
Yes; you receive a guaranteed, lifetime benefit. You can't outlive your benefit. |
No; the amount of your benefit can fluctuate—up and down—depending on how much you've contributed, the performance of the investments you select, and whether you take out a loan or withdraw some of your money. When your account balance reaches $0, you will no longer have any benefits under the plan. |
| Benefit Amount |
You receive a predictable benefit, calculated using a set formula. |
Your benefit is based on your contributions, any employer contributions, and any investment earnings or losses on those contributions (minus any withdrawals or loans received). |
| Vesting (Entitlement to Benefits) |
You are always 100 percent vested in your contributions. After 4 years of service or when you reach age 55 while in active employment, you become vested in a portion of the employer contributions made on your behalf. Vesting also entitles you to additional benefits. |
You are always 100 percent vested in your contributions. Vesting in your employer’s contributions varies by the plan sponsor (for example, you may become 20 percent vested in employer contributions for each year of service until you are fully vested). |
| Disability Benefits |
IPERS provides disability benefits. To qualify for disability benefits, you must be vested, apply for benefits (you must indicate on your application for IPERS retirement benefits that you are retiring due to a disability), be receiving federal social security or railroad retirement disability benefits, and have ended all IPERS-covered employment. |
Typically, defined contribution plans do not provide disability benefits. |
| Death Benefits |
IPERS provides pre- and postretirement death benefits. The methods of payment, such as a lump sum or monthly benefit, differ depending on whether you die before or after retirement, the payment option you choose at retirement, and the number and type of beneficiary(ies) you designate. |
In the event of death, your account balance is transferred to your
beneficiary(ies). Your beneficiary may then decide how the value of the account is paid out to him or her. |
|
