QILDRO Form – Section by Section Explanation
QILDRO Form – Section By Section Explanation
A Qualified Illinois Domestic Relations Order (QILDRO) must include all elements specified by statute. Most large Plan Administrators in Illinois, including those in Chicago, DuPage and surrounding suburbs, have their own form. However, other than the name of the Plan (TRS, SURS, MEABF, etc.) and Plan Administrator’s contact information, they are practically identical. Here is a summary explanation of the QILDRO Sections. You can follow along looking at the TRS QILDRO form available here.
The first Section of concern, contains the identification and contact information of the Plan, Participant (person working for the sponsor of the Plan) and Alternate Payee (the other spouse). You can provide the social security numbers on a separate cover sheet in most cases.
The next Section concerns the monthly benefit. If the agreement was to provide a specific amount per month, you will input it here. If the agreement stated that the Alternate Payee will receive a specific percentage of the marital portion, you will input the percentage in the 2nd spot (and define the marital portion further down). If the agreement was to provide a percentage of the total retirement, you will list it in the 3rd spot.
Typically, the Marital Settlement Agreement contained in your Judgment for Dissolution of Marriage (divorce decree) will say 50% of the marital portion, or, just 50%. In most cases, that will be the second option above. However, the language of the agreement should be reviewed by an attorney before proceeding. The difference between the options can be tremendous.
The remainder of this section concerns when the benefit will start and when it will end. Typically, it is to start as soon as possible, but in some cases, such as when paying only a certain total amount, it is to start on certain date. Most commonly, the benefit would end upon the Participant’s death, but in the case of paying a certain sum, it might be over after a certain amount of payments have been made.
The next section determines if the Alternate Payee’s payments will be subject to post-retirement increases, often called cost of living adjustments (COLA). In most Plans, these are 3% per year. Again, typically, the answer is “yes”.
The next Section concerns Termination Refund or Lump-sum Retirement Benefit. If Participant has retired or reached retirement age, termination may no longer be an option and the lump-sum retirement benefit may have already been paid out. The Termination Refund would typically consist of the vested contributions. Lump-sum Retirement Benefit is usually relatively small, sometimes consisting of “over-payments” that were not added to the contributions that generated the monthly benefit. As with the monthly benefit section, above, you have the same three options: specific monthly amount, percentage of marital portion or percentage of monthly payments.
The following two Sections concern the Partial Refund and the Lump-sum Death Benefit, respectively. Each provides the same 3 options as the previous Section. Most commonly, the 50% of the marital portion is chosen in both Sections. Partial Refunds are uncommon. Lump-sum Death Benefits only occur if the Participant died prior to receiving back his/her contributions in the form of monthly benefits. This is unusual, as typically, it only takes a few years to get back what one paid into the pension.
The next Section of note is the Marital Portion Benefit Calculation Formula. If in any of the previous Sections, a percentage of the marital portion was chosen, you must complete this Section. This is the traditional coverture or Hunt formula.
In short, it states that you have a fraction, the numerator is the number of months the Participant accumulated service in the Plan during the marriage (say 120 months). The denominator is the total service in the Plan (say 200 months). That fraction is multiplied by the monthly retirement benefit (for example, $3,000). The outcome is multiplied by the fraction you listed before (lets assume 50%). In our example, 120 divided by 200 is 0.6, which multiplied by $3,000, comes to $1,800, 50% of which is $900. So the Alternate Payee would receive $900 per month.
In completing this Section, you will need to decide if the formula should account for regular service months only, or permissive services months as well (for example, in years past, Participants were allowed to buy additional service months). You will also input the date of marriage and date of divorce.
Note, that in all cases where your QILDRO does not provide a specific amount the Alternate Payee is to receive, you will need to have entered a QILDRO Calculation Order. The Plan Administrator simply wants to know that it is paying the right amount of money, and if you are using the formula or percentage of the monthly benefit, there is no way to figure out the final numbers until you know the retirement amounts. This means that you will usually have the QILDRO entered and provide a certified copy of the QILDRO to the Plan, and wait until the Participant applies for retirement and all learn the final figures.
Feel free to contact me if you have questions. This is intended only as a general guide, not to be followed in each situation.
