Dividing CalSTRS Pensions in a Divorce
The California State Teachers’ Retirement System (CalSTRS) provides retirement benefits to educators in California, and these benefits are considered community property under California law. When dividing retirement benefits in a divorce, a Qualified Domestic Relations Order (QDRO) or a Stipulation and Order Regarding California State Teachers’ Retirement System (CalSTRS) is required to ensure compliance with state and federal laws.
CalSTRS’s Community Property department, which oversees DROs for their members, is the best retirement system we’ve dealt with in the entire country—shoutout to Trina, Celina, Kathi, and all the other members of that team that go above and beyond for their teachers and make the DRO process smoother for everyone.
CalSTRS Retirement Plans
CalSTRS offers three retirement plans:
- Defined Benefit Program: Provides lifetime monthly benefits based on service credit, final compensation, and retirement age.
- Defined Benefit Supplement: An additional savings account for educators who earned service credit after 2000.
- Cash Balance Benefit Program: Designed for part-time and temporary educators, offering lump-sum payments or rollovers.
Methods of Division for CalSTRS Benefits
The method used to divide CalSTRS benefits depends on whether the member is retired and the type of plan they hold. The two primary methods are the Time Rule Formula and the Segregation Method.
- Segregation Method:
- Available only if the member is not retired or receiving disability benefits.
- The nonmember spouse is awarded 50% of the member’s service credit, contributions, and interest earned during the marriage.
- The nonmember spouse has an independent account and can begin receiving benefits at age 55.
- Lump-sum distribution of contributions and interest is available.
- Time Rule Formula:
- Can be used for both active and retired members.
- The nonmember spouse is awarded a proportionate share of the member’s monthly benefit.
- Benefits are tied to the member’s retirement date; payments begin when the member retires.
- No lump-sum distribution; payments are monthly.
For Cash Balance plans, only the Segregation Method is permitted, requiring a specified percentage or flat-dollar award.
Joinder: A Necessary Step in the QDRO Process
To allow CalSTRS to process the terms of a QDRO and communicate with both parties, joinder is required. Joinder:
- Makes CalSTRS a party to the divorce case.
- Prevents unauthorized changes to the member’s account.
- Allows the nonmember spouse to obtain account information without a subpoena.
- Is required by California law.
- Places a legal hold on the account until the QDRO is finalized, preventing changes such as beneficiary updates.
Death Benefits and Option Elections
CalSTRS provides a one-time death benefit to designated beneficiaries. If a QDRO specifies a community property share, the remainder can be assigned to another beneficiary.
- Monthly Benefit Continuation:
- If benefits are divided using the Time Rule Formula, payments to the nonmember spouse cease upon the member’s death unless an option election is made.
- Available options include:
- 100% Beneficiary Option: Full continuation of benefits.
- 75% Beneficiary Option: 75% of the member’s benefit continues.
- 50% Beneficiary Option: 50% of the member’s benefit continues.
- Compound Option: Multiple beneficiaries can be assigned different percentages.
- In our drafts of CalSTRS orders, we try to balance the cost of option elections with protecting the non-employee spouse.
Request a Community Property Statement of Account
Before deciding on the division method of CalSTRS benefits, both parties should request a Community Property Statement of Account from CalSTRS. This provides a detailed breakdown of account values and helps the parties decide whether they want a Time Rule or segregation divsion.
Get Started!
Dividing CalSTRS benefits requires careful legal planning to ensure compliance and financial fairness. For personalized guidance on navigating these complexities, it’s essential to consult with a legal expert who specializes in QDROs.
Set Up a Free Consultation Today
If you are facing a divorce and need assistance with dividing your CalSTRS benefits, contact us at Peacock QDROs to schedule a consultation. Our experienced attorneys can guide you through the process, draft a comprehensive QDRO, and ensure your interests are protected. Visit PeacockEsq.com or call (929) 437-3767 to learn more.
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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.
