CDA Retirement & Pension Division 3 — Questions and Answers
Question 1: Military retirement benefits divided in divorce are governed by which federal law?
- ERISA
- Uniformed Services Former Spouses' Protection Act (USFSPA) (Correct answer)
- Federal Employees Retirement System Act
- Servicemembers Civil Relief Act
Correct answer: Uniformed Services Former Spouses' Protection Act (USFSPA)
The USFSPA authorizes state courts to treat military retired pay as property subject to division and allows direct pay to former spouses through DFAS.
Question 2: Under the USFSPA, the 10/10 rule means:
- The marriage must have lasted 10 years with 10 years of creditable military service
- The alternate payee receives 10% for every 10 years of service
- At least 10 years of marriage must overlap with 10 years of military service for direct DFAS payment (Correct answer)
- Military members with 10 years service get a 10% divorce benefit reduction
Correct answer: At least 10 years of marriage must overlap with 10 years of military service for direct DFAS payment
The 10/10 rule requires at least 10 years of marriage overlapping with 10 years of creditable military service for the former spouse to receive direct payment from DFAS.
Question 3: Federal civilian employee retirement benefits under FERS or CSRS are divided using which document instead of a QDRO?
- Military Retired Pay Order
- Court Order Acceptable for Processing (COAP) (Correct answer)
- Federal Retirement Division Order (FRDO)
- Office of Personnel Management Transfer Order
Correct answer: Court Order Acceptable for Processing (COAP)
Federal civilian retirement plans (FERS/CSRS) use a Court Order Acceptable for Processing (COAP), not a QDRO, which is reserved for ERISA plans.
Question 4: When a spouse has a pension with an early retirement subsidy, the CDA should advise that the QDRO:
- Automatically includes the subsidy for the alternate payee
- Must explicitly address whether the alternate payee shares in the subsidy (Correct answer)
- Cannot assign any portion of the subsidy
- Eliminates the subsidy entirely upon divorce
Correct answer: Must explicitly address whether the alternate payee shares in the subsidy
Early retirement subsidies are not automatically shared; the QDRO must specifically address whether the alternate payee participates in any enhanced early retirement benefit.
Question 5: A spouse who is the alternate payee under a QDRO can avoid the 10% early withdrawal penalty if they:
- Reinvest the funds in a Roth IRA within 60 days
- Take a direct distribution from the qualified plan without rolling it over (Correct answer)
- Wait until the participant reaches age 59½
- Use the funds for higher education expenses
Correct answer: Take a direct distribution from the qualified plan without rolling it over
Under IRC §72(t)(2)(C), the 10% early withdrawal penalty does not apply to distributions from a qualified plan made to an alternate payee under a QDRO.
Question 6: In the context of divorce, 'pension present value' refers to:
- The total contributions made by the employee during the marriage
- The lump sum today that is actuarially equivalent to the future stream of pension payments (Correct answer)
- The current account balance minus taxes owed
- The employer's cost to fund the pension obligation
Correct answer: The lump sum today that is actuarially equivalent to the future stream of pension payments
Present value of a pension is the discounted current lump sum equivalent of all future expected pension payments, calculated using actuarial assumptions.
Question 7: Which interest rate assumption most significantly affects the present value calculation of a defined benefit pension?
- Inflation rate
- Discount (interest) rate (Correct answer)
- Mortality rate
- Salary growth rate
Correct answer: Discount (interest) rate
The discount rate is the most sensitive variable; a lower discount rate produces a higher present value, and a higher rate produces a lower present value.
CDA Retirement & Pension Division 3
Military retirement benefits divided in divorce are governed by which federal law?