PERS pension buyout

[bummer]

What is the name of your state (only U.S. law)? California

I have belong to the public employees retirement system for 21 years. My wife and I are divorcing after 7 years. Is there a simple calculation to figure out the amount to buy her out? During our maggiage the employee contribution was paid by my work and averaged about $6,000 per year while we were married.

 

[LdiJ]

What is the name of your state (only U.S. law)? California

I have belong to the public employees retirement system for 21 years. My wife and I are divorcing after 7 years. Is there a simple calculation to figure out the amount to buy her out? During our maggiage the employee contribution was paid by my work and averaged about $6,000 per year while we were married.

I assume that you are fully vested? Unless CA is different than other states the PERS itself cannot be divided, so it would have to be offset by other assets. Basically she would be entitled to 1/2 of the amount contributed during the marriage, and any growth attributed to that 1/2.

 

[nextwife]

I assume that you are fully vested? Unless CA is different than other states the PERS itself cannot be divided, so it would have to be offset by other assets. Basically she would be entitled to 1/2 of the amount contributed during the marriage, and any growth attributed to that 1/2.[/QUOTE]


With the current state of various retirment savings plans. one wonders: if a party contributes $6000 during the marriage, and what tat $6000 bought is presntly worth $4000, does one split $4000? If a spouse shares in the increase in value, should they not also share in any decrease in value that occurred DURING the marriage?

 

[LdiJ]

I assume that you are fully vested? Unless CA is different than other states the PERS itself cannot be divided, so it would have to be offset by other assets. Basically she would be entitled to 1/2 of the amount contributed during the marriage, and any growth attributed to that 1/2.[/QUOTE]


With the current state of various retirment savings plans. one wonders: if a party contributes $6000 during the marriage, and what tat $6000 bought is presntly worth $4000, does one split $4000? If a spouse shares in the increase in value, should they not also share in any decrease in value that occurred DURING the marriage?

I absolutely agree. Growth or decrease, either way its shared. However only the growth or the decrease in the value of the money contributed during the marriage.

 

[mistoffolees]

I assume that you are fully vested? Unless CA is different than other states the PERS itself cannot be divided, so it would have to be offset by other assets. Basically she would be entitled to 1/2 of the amount contributed during the marriage, and any growth attributed to that 1/2.[/QUOTE]


With the current state of various retirment savings plans. one wonders: if a party contributes $6000 during the marriage, and what tat $6000 bought is presntly worth $4000, does one split $4000? If a spouse shares in the increase in value, should they not also share in any decrease in value that occurred DURING the marriage?

The correct amount is the present value of the amount contributed during marriage.

For example, during your marriage, you contributed $10 K. The current value of that $10 K is $15 K. You split the $15 K. If it drops to $5 K, that's the amount you split.

HOWEVER, this is pre-tax money. It is not correct to offset pre-tax money 1:1 with after tax money (although many attorneys and even some people who claim to be experts in financial planning do so). If you are supposed to split $20 K in PERS, then she is entitled to $10 K in PRE-TAX money. If you have other pre-tax assets to equalize with, use those. If you have to use after tax money, you need to adjust it downward since you've already paid taxes on the after tax money.

If you're in the 30% tax bracket (including state, Federal, and SSI taxes), then at the very simplest level, you'd give her $7 K in after tax money to offset $10 K in pretax money. Ideally, you'd have to do a more sophisticated calculation involving your current tax rate, her current tax rate, anticipated future tax rates, and so on and this involves a lot of guesses, as well, so it does come down to a guess, but any guess is better than a 1:1 offset - unless you think you're permanently in the 0% tax bracket, make sure you have an adjustment for taxes.

 

[LdiJ]

The correct amount is the present value of the amount contributed during marriage.

For example, during your marriage, you contributed $10 K. The current value of that $10 K is $15 K. You split the $15 K. If it drops to $5 K, that's the amount you split.

HOWEVER, this is pre-tax money. It is not correct to offset pre-tax money 1:1 with after tax money (although many attorneys and even some people who claim to be experts in financial planning do so). If you are supposed to split $20 K in PERS, then she is entitled to $10 K in PRE-TAX money. If you have other pre-tax assets to equalize with, use those. If you have to use after tax money, you need to adjust it downward since you've already paid taxes on the after tax money.

If you're in the 30% tax bracket (including state, Federal, and SSI taxes), then at the very simplest level, you'd give her $7 K in after tax money to offset $10 K in pretax money. Ideally, you'd have to do a more sophisticated calculation involving your current tax rate, her current tax rate, anticipated future tax rates, and so on and this involves a lot of guesses, as well, so it does come down to a guess, but any guess is better than a 1:1 offset - unless you think you're permanently in the 0% tax bracket, make sure you have an adjustment for taxes.

If its divided via a QDRO, then she would deal with any tax consequences herself.

Also, there is no 30% tax bracket. There is a 28%, a 33% and a 35%...but no 30% and someone has to have a fairly high income (87,700, single, with only the standard deduction and the personal exemption) to hit even the 28% bracket, and more than 173,400 to go over the 28% bracket.

 

[nextwife]

If its divided via a QDRO, then she would deal with any tax consequences herself.

Also, there is no 30% tax bracket. There is a 28%, a 33% and a 35%...but no 30% and someone has to have a fairly high income (87,700, single, with only the standard deduction and the personal exemption) to hit even the 28% bracket, and more than 173,400 to go over the 28% bracket.

It's not my post that you are quoting with my name. The poster was Mistoffolees

 

[LdiJ]

It's not my post that you are quoting with my name. The poster was Mistoffolees

I didn't do that on purpose...I have seen that happen here before and I don't know why it happens. All I did was hit the quote button. Please notice that when I did quote you, it posted as if I quoted me.

 

[mistoffolees]

If its divided via a QDRO, then she would deal with any tax consequences herself.

Also, there is no 30% tax bracket. There is a 28%, a 33% and a 35%...but no 30% and someone has to have a fairly high income (87,700, single, with only the standard deduction and the personal exemption) to hit even the 28% bracket, and more than 173,400 to go over the 28% bracket.

I wish you'd learn to read before attacking me.

I said gave an example (you do understand what an example is, don't you?) where TOTAL tax debt was 30% - and specifically stated that this includes federal and state income taxes as well as SSI - which total could easily reach 30%.

And he specifically asked about buying her out of PERS - so a QDRO isn't what he is considering. In fact, I'm not sure you can use a QDRO with PERS even if you want to. Heck, your first post in this thread specifically stated that you couldn't divide a PERS, so why are you bringing up QDRO now?

 

[Alabaster]

An answer

Yes, you can use a QDRO with PERS. It's only the Fed govt that doesn't allow QDROs - they require something called COAPs. The State Govt is well within the jurisdiction of California courts, and a QDRO will suffice.

To be honest, for a QDRO you may be better off contacting a pension specialist rather than a normal family law attorney. You will save lots of money, and you will get better advice. My office, for instance, won't do QDROs, because of potential long-term exposure issues. There are many attorneys in town who will take your money, but you are better off going to a specialist.

 

[garrula lingua]

PERS is very approachable: call, ask for legal dept and tell them you need a QDRO on your account. They have a standard/recommended form which they will send to you.

PS: For those reading these posts, there are defined benefit and defined contributions retirement accounts.
Witn PERS, it doesn't matter (theoretically) whether the market goes down, the members are still due a sum certain after a specific number of years of service and age. If the state agency didn't fund the retirement properly, it will have to come out of their current budget, or by loan from elsewhere.

 

[garrula lingua]

go to calpers.ca.gov

they have a 49 page document which includes instructions on doing a QDRO and explains community property aspects of your account:
https://www.calpers.ca.gov/mss-pub/SearchController?viewpackage=action&PageId=SearchCatalog&package_code=427

Good luck.
Watch out for the law firms that charge hugh amounts for doing QDROS that the agencies will walk you through.
The easiest solution is to buy her out of your pension: offer something she wants - a greater share of the house equity or your picking up more of the debts, etc. Things don't have to be exactly even, just agreed as to value and use (heck, if you are both amicable, do a Marital Settlement Agreement and your divorce costs will be minimal).