Texas is a community property state, so any AFRF benefits accrued during marriage may be divided by a court in a divorce proceeding. If, during a divorce proceeding, it is determined that the member will keep 100% of their AFRF benefit, the Fund will not require any legal documentation. However, if it is determined that the member and their spouse will be dividing the AFRF benefit, a Domestic Relations Order (DRO) will need to be submitted and “qualified” by the Fund (QDRO).
By law, the Fund may not pay any portion of a member’s benefit to anyone other than the member unless a valid QDRO is on file. A QDRO is a special legal order which is signed by the judge who has jurisdiction over the divorce. The purpose of a QDRO is to (1) instruct the Fund what portion of a member’s accumulated contribution refund, monthly retirement benefit, or other distribution from the Fund (such as a DROP account balance) has been awarded to a member’s former spouse (also called an alternate payee) and (2) authorize the Fund to pay such portion directly to the alternate payee as opposed to the member. Submission of a copy of a divorce decree instead of a QDRO is not sufficient.
To be valid, the QDRO must meet specific requirements. QDROs that do not meet AFRF requirements will not be honored, which could result in delays and additional legal costs. Although a judge signs a QDRO, the Fund retains ultimate authority under state law to determine whether a QDRO is qualified and may reject a QDRO even if entered by a court.
To avoid rejection of a QDRO, the Fund has adopted two model QDRO forms for attorneys to use to draft the QDRO correctly. It is strongly recommended that these forms are utilized and a draft of the QDRO be submitted to the Fund to be reviewed prior to the entry of the QDRO by the court. The Fund may reject a QDRO if it does not comply with the forms provided by the Fund. Once entered by the court, a certified copy of the QDRO must be submitted to the Fund before any payments can be made to the alternate payee.
Copies of the Fund’s model QDRO forms for use by members, alternate payees, and their attorneys are below:
Fund staff are available to discuss the effects that a QDRO may have on your benefits, but cannot provide any tax or legal advice. Please contact us to set up an appointment.
I am going through a divorce. What do I need to provide to the Fund?
I am going through a divorce. What do I need to provide to the Fund?
- Once you and your ex-spouse have agreed upon, or the court has otherwise ordered, a division of your retirement benefits from the Fund, you or your attorney will need to prepare a qualified domestic relations order (“QDRO”) to reflect such division. It is strongly recommended that you or your attorney use one of the Fund’s model QDRO forms and present a draft of the QDRO to the Fund to be reviewed prior to the entry of the QDRO by the court.
- Once qualified by the Fund and entered by the court, a certified copy of the QDRO must be submitted to the Fund before any payments can be made to the alternate payee.
- Submission of a copy of a divorce decree instead of a QDRO is not sufficient.
What is the difference between the Fund’s two model QDRO forms: Standard QDRO Form and the QDRO Form with DROP Alternatives?
Standard QDRO Form: Under this form, all distributions from the Fund relating to the member’s service with AFD (including a return of accumulated contributions, a monthly annuity benefit, and/or the balance of the member’s DROP account, if any) will be divided between the member and the ex-spouse pursuant to one of the two formulas provided in the QDRO (i.e., the contribution formula or the credited service formula), as selected by the parties.
QDRO Form with DROP Alternatives: Under this form, distributions from the Fund relating to the member’s service with AFD - other than the member’s DROP account - will be divided between the member and the ex-spouse pursuant to one of the two formulas provided in the QDRO (i.e., the contribution formula or the credited service formula), as selected by the parties. However, the parties may choose to divide the member’s DROP account on a different basis, using one of the options listed below:
- Option A—Percentage Option—Option A allows the parties to award the alternate payee a specific percentage of the member’s DROP account that is different than the percentage derived from the standard formulas described above.
- Option B—Flat Dollar Option—Option B allows the parties to award the alternate payee a specific dollar amount from the member’s DROP account. Note that if the total amount of a member’s DROP account is less than the flat dollar amount set forth by the parties in the QDRO under Option B, the alternate payee will only be entitled to receive the balance in the DROP account.
- Option C—DROP Exclusion Option—Option C allows the parties to specify that the alternate payee is not entitled to any amounts from a member’s DROP account.
Can I just pay my spouse their portion of my pension benefits by withdrawing that exact amount as a lump sum?
No. The statute governing the Fund allows for distributions from the Fund only upon the member’s retirement or termination of employment with AFD, and a lump sum distribution is not always available. Please contact the pension office to determine what options are available to you when you retire or terminate service.
How does my participation in DROP impact the amount that is paid to my ex-spouse?
- Participation in DROP is an optional form of benefit that a member may elect which provides the member with a reduced monthly annuity benefit and a lump-sum benefit, as opposed to only a standard monthly annuity benefit.
- If the parties use the Standard QDRO Form, the member’s DROP account will be divided between the member and the alternate payee using the same formula that will be used to divide the member’s monthly annuity benefit.
- If the parties desire to divide the DROP in a different manner, the parties should use the QDRO Form with DROP Alternatives and select one of the three alternative options for dividing a DROP account (see question #2 above for more detail).
I am an alternate payee under a QDRO. When will I start receiving my portion of my ex-spouse’s monthly benefit?
Because of the nature of the Fund as a defined benefit plan, the payment of benefits to the alternate payee cannot begin until the member has retired or terminated service with AFD and commenced receiving his/her benefits from the Fund, even if the QDRO is approved by the Fund before the member's retirement or termination. This means the Fund cannot pay the alternate payee until it has an approved QDRO on file and the member either:
- retires and starts to receive a monthly retirement annuity benefit,
- terminates service with AFD and takes a refund of accumulated contributions, or
- passes away and a death benefit or other distribution becomes payable to the member’s survivor under law or the member’s estate.
I am an alternate payee under a QDRO, and I was awarded a portion of my ex-spouse’s DROP account. When will I receive a distribution from that account?
When an alternate payee is awarded a portion of a member’s DROP account, that portion of the DROP account will be segregated for the benefit of the alternate payee, and the alternate payee may withdraw from such segregated account in accordance with the Fund’s rules applicable to alternate payees. Under the current Fund Rules, alternate payees are only eligible for a maximum of 4 total distributions from their DROP account.