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PENNSYLVANIA LAWS, DECISIONS AND PROCEDURES RELATING TO QUALIFIED DOMESTIC RELATIONS ORDERS

  1. Definition of a QDRO under Pennsylvania Case Law:

    The Courts in Pennsylvania have defined a QDRO as follows:


    QDRO is a limited exception to the pension plan anti-alienation provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., and Internal Revenue Code, 26 U.S.C. § 1 et seq., which otherwise prohibit assignment or alienation of pension benefits. Berrington v. Berrington, 534 Pa. 393, 397 n. 2, 633 A.2d 589, 591 n. 2 (1993). "A QDRO . . . is a domestic relations order which creates or recognizes the rights of an alternate payee to receive all or a portion of the benefits payable to a participant under the [pension] plan." Id. at 397 n. 3, 633 A.2d at 591 n. 3. "To be `qualified,' the order must contain certain required information and may not alter the amount or form of plan benefits." Id.

    See Prol v. Prol, 2007 Pa. Super. 313, 935 A2d 547 (2007) at fn 2.


  2. Division of a Defined Benefit Plan (Pension) Under Pennsylvania Divorce Code:

    Section 3501(c) of the Divorce Code provides that a defined benefit plan shall be divided by use of a coverture fraction, and that the coverture fractions shall apply to all post-separation enhancements, except for those that are the result of post-separation monetary contributions of the contributing spouse. 23 Pa.C.S.A. § 3501(c). The applicable statutory text is as follows:


    (c) Defined benefit retirement plans. — Notwithstanding subsections (a), (a.1) and (b):


    (1) In the case of the marital portion of a defined benefit retirement plan being distributed by means of a deferred distribution, the defined benefit plan shall be allocated between its marital and nonmarital portions solely by use of a coverture fraction. The denominator of the coverture fraction shall be the number of months the employee spouse worked to earn the total benefit and the numerator shall be the number of such months during which the parties were married and not finally separated. The benefit to which the coverture fraction is applied shall include all postseparation enhancements except for enhancements arising from postseparation monetary contributions made by the employee spouse, including the gain or loss on such contributions.


    (2) In the case of the marital portion of a defined benefit retirement plan being distributed by means of an immediate offset, the defined benefit plan shall be allocated between its marital and nonmarital portions solely by use of a coverture fraction. The denominator of the coverture fraction shall be the number of months the employee spouse worked to earn the accrued benefit as of a date as close to the time of trial as reasonably possible and the numerator shall be the number of such months during which the parties were married and not finally separated. The benefit to which the coverture fraction is applied shall include all postseparation enhancements up to a date as close to the time of trial as reasonably possible except for enhancements arising from postseparation monetary contributions made by the employee spouse, including the gain or loss on such contributions.


  3. Post-separation Increases in Retirement Benefits:

    An increase in retirement benefits that occurs after the final separation of the parties is generally not considered marital provided that increase results from the participant’s monetary contributions.  Where a post-separation increase or enhancement results from passive forces and is not based on the titled spouse’s contributions, it is generally considered marital.  Smith v. Smith, 595 Pa. 80 (2007).


    In Smith, the Supreme Court of Pennsylvania held that the non-employee (nonparticipant) spouse is entitled to enjoy increases in value of retirement benefits that result from the continued employment after the parties’ separation.  Id. (citing Holland v. Holland, 588 A.2d at 60).   In Smith decision clarifies that that “post-separation payroll deductions” are “’part and parcel of the continued employment of the worker” and, thus, do not constitute monetary contributions that would be excluded from the fractional allocation method set forth in 23 Pa.C.S.A. § 3501(c). 
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