Most divorce practitioners are aware that dividing a pension or qualified retirement asset as part of the property division requires a few extra steps. Because retirement plans are governed by federal law (as opposed to state divorce law) a standard divorce judgment simply will not do the trick. Instead, the payee of these benefits must submit a Qualified Domestic Relations Order (QDRO), which is essentially a special type of court order which conforms to state and federal law as well as the terms of the Marital Settlement Agreement and the specific directives of the plan in question. Most divorce lawyers outsource this task to a QDRO attorney who specializes in the drafting of these types of orders.

However, problems arise when the pension that is referenced in the divorce agreement is provided by a government employer. This is because government plans (federal, state and local) are exempt from ERISA, which is the law that permits QDROs in the first place.  The effect of this exemption is that, while government retirement plans are marital assets; the plan administrator cannot be forced to make direct payments to the non-employee spouse.

In Florida, this primarily affects parties whose spouse is employed by a municipality. State and county workers are covered under the Florida Retirement System (FRS) which voluntarily accepts QDROs (though with some distinctions from private-plans QDROs). Municipalities on the other hand are free to accept or reject QDROs on a plan-wide basis. (In Florida most of them refuse to QDROs unless they are used for alimony or child support.

This leaves the non-employee spouse in the unenviable position of owning an asset, which they do not have access to. Therefore, if you represent the spouse of a municipal worker in Florida, the best practice is to value the pension and take an off-setting asset as part of the overall property division. Where this is not possible, the non-employee spouse is left with few good options.

The next best avenue of recovery is to have the divorce court enter a supplemental order which requires the parties to open a joint bank account and directs the employee-spouse to have the benefits direct deposited into this account. Thereafter, the parties can set up an automatic sweep so that the non-employee spouse’s share can be immediately withdrawn and deposited into his or her personal account. The potential beauty of this method is that while the divorce court cannot hold the employee spouse in contempt for failure to pay (because property division awards are not subject to contempt); it can hold him in contempt for failure to follow its specific order to set up the account.

Of course, this is a cumbersome way for the non-employee spouse to realize her property, and where the withholding is incorrect it can create a potential tax problem. That said, it is often the best option in an otherwise problematic situation.