The Florida Bar

Florida Bar Journal

QDRO Math: Advice to Plan Administrators in Florida


Protecting retirement fund assets for public policy purposes has been deeply rooted in our nation’s history for as long as retirement plans have been in existence.[1] That history shows a desire to protect plan trust funds from invasion by creditors with a non-assignment clause aimed at protecting retirees.[2] These funds were then available for retirees and their families when the employees who earned them could no longer work and support their families.[3] This public policy purpose dates to the days of early collective bargaining sessions, which became popular after 1943 after wages were frozen.[4] But because that protection was equally in place to protect family members, as well, these protections were never designed to prevent family members from accessing these funds through our courts when they had a greater need following an employee’s death, abandonment of family members, or divorce.[5]

These protections were not that meaningful when employers used the tax laws to deduct the cost to maintain these plans as an ordinary business expense and then used their discretion deciding who received benefits and how much was received. The abuse was so widespread for retirement plans that were so varied and complex, Congress worked on curing the abuse for an entire decade before unveiling its comprehensive legislation in 1974. It was called the Employee’s Retirement Income Security Act, better known as ERISA.[6]

The act defined qualified plans that sought the tax deduction and trust fund protections.[7] It also defined nonqualified plans, including top hat plans providing executive compensation, and government plans, exempt from qualified requirements.[8] It defined the vast requirements for qualified plans, including the creation of the joint board for the enrollment of actuaries for purposes of licensing them and defined the vast obligatory rules imposed on them for receiving and maintaining their federal license.[9] The federal license qualified actuaries hold requires that they place the interest of participants and beneficiaries before the interests of the companies or the unions that pay them, similar to the responsibilities fiduciaries have.[10] But because there are other people who have an important role that could affect the security of these funds, the act established strict fiduciary standards and rules on everybody that provide services to the plan to safeguard the assets for plan participants and their beneficiaries.[11] Such individuals include plan administrators and other trustees with respect to the payment of expenses and investment decisions. ERISA defined who these officers were, created strict rules regarding their roles and held them accountable to the participant employees who could sue them for mismanagement and breach of their fiduciary duties.[12] The total effect of this massive legislation was to send the resounding statement to the employers, union sponsors, and these trustees, that these funds represent earned wages for the services performed of plan participants and are there for the exclusive benefit of the employees that earned them and their beneficiaries, punishable for breach of duties with fines, and civil and criminal penalties.[13]

ERISA also defined retirement plan groups and created classification distinctions between them, either as defined benefit or defined contribution plans, and it provided further classification groupings distinguishing defined contribution plans between profit sharing or pension plan features.[14] Because welfare benefits[15] are also employee benefits for which employers that pay them seek deductions as an ordinary business expense, they too were defined with extensive rules that must be observed.[16]

ERISA classified defined benefit plans as a fixed commitment, and it defined the amount of benefit received at retirement.[17] It classified defined contribution plans as a fixed commitment on the amount of contributions paid whose value at retirement depended on investment returns.[18] The amount of benefit available at retirement also depended on whether the plan allowed employee contributions and on the amount of employee contributions made. The defined benefit plan was a pension plan described as a fixed commitment on the amount of benefit available at retirement;[19] whereas the defined contribution plan could involve employer discretion on the amount of contribution, but after deciding each year, was fixed in amount. These were known as profit-sharing plans into which today’s 401(k) plans generally fall.[20] They are distinguished from defined contribution pension plans that provide a fixed contribution amount, fixed without discretion.[21] They include money purchase pension plans and target benefit plans. A target benefit plan is a hybrid pension plan that has defined benefit features used to determine the fixed defined contribution amount.[22] But in all other respects it is a defined contribution plan because what is available at retirement depends strictly on investment earnings on the defined contribution amount. The former includes 403(b) annuity plans, except such plans preselect an insurer that provides conversion to annuities — some are automatic and others allow the employee to decide whether to receive the benefit as an annuity or a lump sum amount.[23] Many more of the plans can be hybrid between pension plan and profit-sharing plan features, and defined contribution plans with a defined benefit floor.

ERISA Survivor Rights

ERISA of 1974 provided intact families with survivor rights that paid earned benefits to widows and widowers.[24] These survivor rights were the required form of payment in marriages of more than one year for qualified plans.[25] These rights apply differently depending on whether the employee dies after retirement with the benefit in payment status, or before the participant began receiving the benefits. The Qualified Joint and Survivor Annuity (QJSA) was the required form of benefit at retirement.[26] A QJSA benefit must provide at least 50% of the amount at retirement to the beneficiary spouse after the participant dies.[27] This meant this would be the form of benefit paid at retirement unless the beneficiary spouse consents in writing to waive that requirement.[28] But because that only protected spouses after retirement, ERISA added Qualified Pre-retirement Survivor Annuity Protection to protect the amount earned paid in the QJSA form at the normal retirement age defined in the plan trust.[29] These ERISA rights ended at divorce.[30]

Retirement Equity Act of 1984

The incidence of abandonment of family members and divorce sharply increased during the 1970s, forcing states to deal with competing public policy concerns by interpreting ERISA congressional intent.[31] The non-assignment clause found at 29 U.S.C. §1056(d)(1) was adopted by retirement plans created after Congress froze wages in 1943, when employees sought retirement benefits that included these protections in lieu of increased wages in collective bargaining sessions.[32] Its purpose was to protect the funds from attachment by creditors so that they were available at retirement for the intact family unit, which included children and spouses.[33] Because divorce and abandonment became widespread in the 1970s, state family courts faced with these problems determined that the non-assignment clause did not apply to either.[34] State and federal courts collectively determined that the non-assignment clause did not prevent the family law court from accessing these funds to pay for support.[35] It must be kept in mind that few states divided these plans as property before the 1980s. In Florida, that was not possible until 1988 when the legislature created the equitable distribution statute. Congress codified these rulings in the Retirement Equity Act (REA) and added provisions that gave a nonemployee spouse the ability to receive these benefits while the employee was still working.[36] It also provided the court with the ability to award survivor benefits after the parties divorced which were only payable to married beneficiaries before Congress added them in REA.[37]

REA then added these and other rights that courts could award either as property or support.[38] Such modifications to ERISA were payable through an order called a qualified domestic relations order (QDRO).[39] As this mechanism was an exception to the plan’s non-assignment clause in ERISA of 1974 found at 29 U.S.C. §1056(d)(1), it carved out special rules that must be strictly met before a qualified plan could pay these benefits ordered by a court.

The QDRO provided two methods of division. The benefit could be divided when the plan participant retired in the same way it would be paid if the parties remained married, except the amounts payable also allowed state courts to divide the amounts paid to each.[40] This method of division is popularly called the sharing method because it is payable only when the participant retires. A major purpose of the QDRO is to allow the court to award the spouse benefits when that spouse wanted them or needed to receive them.[41] That ability is clearly stated in 29 U.S.C. §1056(d)(3))E)(ii), by defining the earliest date it may be received while the participant continues to work.

Congressman Clay addressed the full House of Representatives the date REA was passed by the House with an example on how to divide the benefit that eliminates employee control by dividing the benefit over the beneficiaries’ lifetime.[42] This became known as the separate interest method because the beneficiary has complete control over when it may be received. This method also eliminates the necessity for post-retirement survivor rights (QJSA), by dividing the benefit over the beneficiary’s lifetime and by allowing the court to award protection for qualified pre-retirement survivor annuity (QPSA) should the participant die before he/she retired. This last requirement all but disappeared through the decades since REA was enacted because the annual actuarial cost for separately determining the QPSA cost exceeded any benefit the plan received by charging it to the participant or beneficiary, and instead some employers began providing the QPSA benefit free of charge. When an employer did not want to incur either the annual actuarial charge or absorb the QPSA cost, it charged the beneficiary implicitly for the cost by creating a separate actuarial equivalence definition applicable for beneficiary spouses of QDROs. This made the cost a one-time cost when the separate interest is set up by scaling down mortality to cover the cost.

The federal government plans added most of the Retirement Equity Act provisions to the CFR, thereby placing pressure on state and municipal retirement plans to follow suit on many of the provisions. Many government plans found it advantageous qualifying its plans under the IRS code forcing compliance with many of the IRS requirements. These changes added complications on assignments involving military, Civil Service Retirement System (CSRS), and the Federal Employees Retirement System (FERS) plans requiring QDRO math be employed by plan administrators.

However, in Florida, assignments to plans cannot be made on divorce for municipal plans for property divisions because our appellate decisions concluded that the non-assignment clause applies to spouses as well as to creditors. This contradicts the majority of sister state and federal rulings that concluded otherwise.[43] The issue of disagreement centers on interpreting legislative intent. When the provision was added 80 years ago, divorce was rare and it was 40 years before benefits were considered marital property. Thus, the clear legislative intent to protect the entire intact family from creditors was not extended to divorces here in Florida, which is why our caselaw allows an assignment for support but not for property division purposes. Our Fifth DCA recognized the problems with this construction and how our equitable distribution statute creates a property right that conflicts with the interpretation that the non-assignment clause frustrates its division and found that the conflict in both competing statutes is a matter of great public importance that only our supreme court could decide.[44] To date that conflict has not been addressed by our supreme court. This creates exceptional problems that exacerbates the problems found in QDRO math discussed next.


The costs associated with optional forms of benefits and survivor rights became the QDRO math needed to divide benefits pursuant to divorce. But this particular QDRO math only deals with interpreting plan provisions. That math gets far more complicated when family law caselaw is applied to benefit division and family law attorneys may mistakenly seek QDRO math from plan administrators who only know the math that applies to their plan, and not the family law rulings that deal with the complications interpreting Florida’s equitable distribution statute.

State laws vary widely from state to state, and REA provided the state court freedom to fashion a division as it sees fit.[45] The mistake that too many plan administrators make in providing the information sought by subpoenas is that they understand what can be divided under a QDRO exception but do not understand the family law applications on how a division can be accomplished. To meet that statutory intent, our decisions are replete with findings that valuations are needed to divide substantial marital property and when the benefits are awarded absent valuation, this by itself, is grounds for reversal on appeal.[46] That means the plan administrators should provide basic information, such as salary used for benefit determinations, the benefit provisions that apply, an accrued benefit statement for the date asked, or any other raw data needed to perform the calculations themselves. They do a tremendous disservice when they give family law legal conclusions when requested to do so. To illustrate this and just how dangerous giving the conclusion are, we shall deal with some every day examples involving QDRO math below. Including all the examples would involve a comprehensive book on the subject matter, so we limit the examples to those frequently encountered.

Defined Contribution Plans

Measurement of Earnings — In measuring benefit earnings of defined contribution plans, those earnings include, under ERISA, all increases made during the measurement period.[47] The earned benefit must be defined this way to prevent employer discretion on what is earned. Texas is one of a small number of states that define earnings in their community property laws that align with ERISA’s definition of earnings.[48] The vast majority of sister states define marital property distinguishing appreciation between its active and passive appreciation components.[49] When there is no operation of employee labor with investing the assets, active appreciation includes cash contributions from both the employer and employee.[50] The balance is considered passively earned.[51] Unlike Texas, where no such distinction is drawn, passive appreciation is divided between its marital and non-marital components so that the amount of each requires a valuation by an expert that both has expertise equivalent to or greater than a plan administrator that is also well versed in state caselaw. When employee effort is expended with investments, the expert must know how to distinguish that passively earned from that actively earned. If the expert cannot differentiate between them, then Florida looks at all the appreciation as Texas does. While not difficult to do, it does require understanding how to work the caselaw. That is because great effort can be spent with investments but that does not necessarily mean that an average professional investment advisor could not have achieved the same result you did without the great effort.[52] If one can show that, then the effort was not the cause of the result, the market caused the increase, irrespective of how much time was spent.[53] And if it is not, the earnings are passively earned even though great effort was expended in achieving the result. The latter effort is known as tangential effort.[54] Little or no effort is the classical definition of passive effort. But as the effort must be the cause of the increase, tangential effort leads to the same conclusion that the earnings are passively earned.

When the active and passive efforts are separated, as most state court do, loans made during the marriage, repaid with payroll deductions, transmute the portion borrowed that included a non-marital potion into marital property when repaid. This is because the marital portion at the point of the loan is based on the marital and non-marital contributions made when the loan was secured. As loan amounts are withdrawn from fungible funds owned by the trust, they are indistinguishable between their marital and non-marital components, and therefore retain their marital and nonmarital percentages after the disbursement is made. It is the very concept of trust ownership that leads to this conclusion, otherwise the doctrine of commingling applies, and commingling causes an interspousal gift made converting all funds to marital property.[55] When that occurs, there is no non-marital component.[56] But the retirement trust owns the funds, and the employee only has a right to a specific amount of money from the trust. Without that differentiation, forfeitures in profit-sharing plans could not be reallocated among participants nor could they be used to reduce funding requirements in defined benefit and defined contribution pension plans because forfeitures owned by the account holder could not be forfeited and all benefits, at all times, would be 100% vested.

When the loans are repaid, they are paid with payroll deductions, which are marital property, even the interest that accrues as part of the loan. No state could classify the loan based on when it comes out because to do so creates a marital asset of negative value when the loan amount exceeds the marital contributions, plus earnings, which is antithetical to the concept of a property right. And that ignores the principle that the doctrine of commingling does not apply to retirement benefits, something required that would enable a court to consider distinguishing characteristics needed to ensure compliance with a classification depending on the date made.[57]

Catch Up Contributions — The different way earned benefits are determined under ERISA and family law apply also to catch up contributions allowed in 401(k) plans. While every state court recognizes the application of service fractions, how they apply are vastly different from state to state (discussed in greater detail below) and every state views defined contribution plans as different from defined benefit plans and generally rejects the time rule application for defined contribution plans.

Defined Benefit Plans

Survivor Rights — Defined benefit plans have so many actuarial issues associated with them that apply specifically to the laws of each state where providing advice on family law applications can be especially harmful. For example, in Florida survivor benefits are regarded as separate marital property.[58] By design they are structured to provide benefits only to beneficiaries. As separate marital property, each has a marital share interest in that property. Even when they are 100% marital property, dividing benefits with a time rule is extremely prejudicial to their employees because the employee has a 50% interest in it as marital property; yet it is paid to the non-employee spouse, thereby creating an unequal division favoring that spouse. Depending on the ages of the parties, the length of time the benefit is in payment status, the percentage of survivorship benefit that is marital property, the receipt of the survivor benefit can often satisfy that spouse’s 50% interest in the entire pension without providing any lifetime portion to the beneficiary spouse, and when it does not, it can reduce that lifetime portion drastically. In government plans that participate in the Deferred Retirement Option Program (DROP), the marital portion of the DROP account (approved by IRS) is determined by the amount of lifetime benefit.[59] A service fraction applied to both exacerbates the error involved in calculating both to the extreme prejudice of the employee. Even though survivor benefits equally apply to defined contribution pensions, they only apply to intact marriages, which is why it was not addressed above.

Service Fraction (Time Rule) — While there is a litany of issues involved with defined benefit plans, some states, like Florida, prevent the service fraction from applying to the benefit after the date of divorce.[60] The vast majority of states permit its use in all applications on the date of retirement.[61] Such divisions include salary earned after the divorce, which Florida has found benefit earnings that do so involve post-dissolution benefit earnings.[62] Plan administrators that are not fluent in the state laws applicable to such divisions should be careful what advice is given. Wrong advice can easily triple the size of the benefit divided, and that advice should be tempered when participants achieve maximum benefits long before they retire. The time rule must be modified to deal with those facts. Florida allows divisions that are not based on the time rule.[63]

Plans that have benefit formulas that increase the rate of accrual based on the amount of service should not be using the lower benefit formula when it is clear the greater formula applies to the employee. The same supreme court decision that determined the inclusion of salary increases occurring after the marriage ends creates non-marital property ruled the early retirement discount does not apply at the date of divorce if the participant is not discounted at the date of retirement.[64] This means that certain early retirement subsidies determined with lesser early retirement discount are marital property when paid, even if they would not have been paid had the employee terminated employment on the date of divorce. Use of a service fraction based on what was accrued can substantially discount the amount shared and violates the same ruling that provides the time rule cannot be applied after the date of divorce.


Plan administrators should provide basic information when they receive subpoenas. Giving advice on marital portions, or things other than basic information, calls for legal conclusions requiring application of the caselaw to the matter at issue, and is, at best, a disservice to the family law profession. At worst, it is the unauthorized practice of law. Family law attorneys must be vigilant in reviewing information received by plan administrators.

[1] 29 U.S.C. §1056(d)(1). The legislative history in ERISA reveals that following FDR Executive Order 9328 (Apr. 8, 1943), freezing prices and wages, unions used collective bargaining to negotiate plan changes strengthening plan benefits by protecting them from creditors. 1974 U.S.C.C.A.N 4639, 4642, citing 1971 Sen. Rep. No. 92-634, 92 Cong. 2 Sess.

[2] Id.

[3] Stone v. Stone, 450 F. Supp. 919, 922 (N.D. Calif 1978), citing Ray v. Atlantic Richfield Co., 435 U.S. 151, 157 (1978), quoting Rice v. Sante Fe Elevator Corp., 331 U.S. 218, 230 (1947).

[4] Id.

[5] Id. See Majauskas v. Majauskas, 463 N.E.2d 15, 21-22 (N.Y. 1984) (citing Monck v. Monck, 184 App. Div. 656; Zwingmann v. Zwingmann, 150 App. Div. 358; Matter of Spadaro v. New York City Police Dept. Pension Serv., 115 Misc. 2d 494; American Tel. & Tel. Co. v. Merry, 592 F.2d 118)). See also 93 A.L.R.3d 711 (1979).

[6] Kindregan and Inker, A Quarter Century of Allocating Spousal Property Interests: The Massachusetts Experience, 33 Suffolk U. L. Rev. 11 (1999).

[7] 26 U.S.C. §401(a).

[8] Nonqualified plans are certain government and excess benefit plans not subject to 29 U.S.C. §1056(d)(1). Top Hat plans appear several places in ERISA, are generally plans that provide benefits exclusively for highly paid individuals and are unfunded.

[9] ERISA §3042.

[10] 20 C.F.R. §901.

[11] ERISA §404.

[12] ERISA §§409, 501-502; see also 29 U.S.C. §1132.

[13] See H.R. Report 93-533, H.R. 533, 93th Cong., 2 Sess. 1974, 1973 WL 12549 (Leg. His.) 1974 U.S.C.C.A.N 4639, 4639- 4644; see also ERISA §2, Findings & Declaration of Policy (1974).

[14] ERISA §3(2)(a).

[15] ERISA §3(1).

[16] 26 U.S.C. §419; 26 C.R.F. §1.419-1T; for retirement plans, see 26 U.S.C. §404.

[17] 29 U.S.C. §1002 (35).

[18] 29 U.S.C. §1002 (34).

[19] See note 17.

[20] See How a Profit Sharing Plan Is Different From a 401(k) Plan, Human Interest, (Nov. 16, 2021).

[21] Id. See 26 U.S.C. §401(a)(1) and 26 U.S.C. §401(k)(2).

[22] 26 U.S.C. §401(a); Treas. Reg. §§1.401(a)(4)-8(a)(b), 1.401(a)(4)-12.

[23] 26 U.S.C. §403(b); see Your Guide to 403(b) Tax-Deferred Annuity or Voluntary Savings Plan, TIAA (2021).

[24] 26 U.S.C. §401(a)(11); 26 U.S.C. §417; and Treas. Reg. §401(a)-11.

[25] 26 U.S.C. §401(a)(11)(D).

[26] 26 U.S.C. §417(b); 26 CFR §1.401(a)-20.

[27] 26 U.S.C. §417(a).

[28] Id.

[29] 26 U.S.C. §417(a)(3)(B).

[30] Note the requirement of one year of continuous marriage in 26 U.S.C. §401(a)(11)(D) that ends at divorce.

[31] See the 50-year graph in Wendy Wang, The U.S. Divorce Rate Hit a 50-Year Low, Institute of Family Studies (Nov. 10, 2020), showing out-of-control growth during the 70s.

[32] In 1947, a series of administrative proceedings and court decisions under the National Labor Relations Act of 1935 held that pensions were a form of remuneration for the purposes of that act, and they accordingly became mandatory subjects of collective bargaining. (Inland Steel Company v. NLRB, 107 F.2d 247 (7th Cir. 1948), cert. den., 336 U.S. 960 (1949)).

[33] ERISA §2(b); 29 U.S.C. §1001(a).

[34] Id; see also note 6, and Majauskas, 463 N.E.2d at 21, citing Monck v. Monck, 184 App. Div. 656.

[35] Alvarez v. Board of Trustees of the City Pension, 580 So. 2d 151 (Fla. 1991).

[36] See 29 U.S.C. §1056(d)(3). See Public Law 98-397 (Aug. 24, 1984), known as the Retirement Equity Act of 1984.

[37] Id.

[38] ERISA §206(d)(3) (1984); 29 U.S.C. §1056(d)(3) and 26 U.S.C. §414(p).

[39] Id.

[40] Id.

[41] See Congressional Record H. 8761-8762 (Aug. 9, 1984); see also S. Rep. 98-575, 1984 U.S.C.C.A.N. 2547, 2567.

[42] See Congressional Record H. 8761-8762 (Aug. 9, 1984).

[43] Bd. of Pension Trustees v. Vizcaino.

[44] Bd. of Trustees v. Langford, 833 So. 2d 230 (Fla. 5th DCA 2002).

[45] See note 36.

[46] See Haydu v. Haydu, 591 So. 2d 655 (Fla. 1st DCA 1991);Barnes v. Barnes, 592 So. 2d 1260 (Fla. 5th DCA 1992); Levitt v. Levitt, 592 So. 2d 253 (Fla. 2d DCA 1991); Hatcher v. Hatcher, 533 So. 2d 917 (Fla. 2d DCA 1988); Moon v. Moon,594 So. 2d 819 (Fla. 1st DCA 1992); Criswell v. Criswell, 589 So. 2d 427 (Fla. 1st DCA 1991); Mullen v. Mullen, 825 So. 2d 1078 (Fla. 4th DCA 2002).

[47] 26 C.F.R. 411(b)-1.

[48] Texas Family Code §3.007(c).

[49] Arithmetic difference between Fla. Stat. §§61.075(6)(a)1.a and 61.075(6)(b)3.

[50] Mathematical result in applying Fla. Stat. §61.075(6)(a)1.b

[51] See note 49.

[52] O’Neill v. O’Neill, 868 So. 2d 3, 4 (Fla. 4th DCA 2004), citing Young v. Young, 606 So. 2d 1267 (Fla. 1st DCA 1994).

[53] Id.

[54] The Merriam Webster definition of tangential is indirectly related, thereby not satisfying the statutory requirement of cause.

[55] Archer v. Archer, 712 So. 2d 1198 (Fla. 5th DCA 1998); Belmont v. Belmont, 761 So. 2d 406, 408 (Fla. 2d DCA 2002), citing Williams v. Williams, 686 So. 2d 805, 808 (Fla. 4th DCA 1997).

[56] Id.

[57] See Williams, 686 So. 2d at 805, 808.

[58] See Haydu v. Haydu, 592 So. 2d 655 (Fla. 1st DCA 1991), and Johnson v. Johnson, 602 So. 2d 1348 (Fla. 2d DCA 1992).

[59] Russell v. Russell, 922 So. 2d 1097 (Fla. 4th DCA 2006).

[60] Boyett v. Boyett, 703 So. 2d 451 (Fla. 1997).

[61] Majauskas; In Re: Marriage of Brown, 544 P.2d 561 (Cal 1976), and Wisniewski v. Wisniewski, 675 N.E.2d 1362 (Ill. App. 4th. Dist. 1997).

[62] Boyett, 703 So. 2d at 451.

[63] Carollo v. Carollo, 920 So. 2d 16 (Fla. 3d DCA 2004).

[64] Boyett, 703 So. 2d at 453.


Jerry ReissJerry Reiss is a federally licensed actuary and frequent author in The Florida Bar Journal. Admitted to Best Experts in America for Employment Law (2006 -12) and Family Law (2007-12), he also made the Best Experts list in the AAML in 1995.



Christopher G. JonesChristopher G. Jones provides probate and estate administration services that include formal administration and summary administration. Trust administration services include trust modifications, wealth transfer management, and advising trustees and other fiduciaries, as well as representation of trust beneficiaries.

This column is submitted on behalf of the Tax Section, Mark R. Brown, chair, and Taso Milonas, Charlotte A. Erdmann, Daniel W. Hudson, and Angie Miller, editors.