Joinder of Employee Benefit Plans in Irvine Divorce Cases
California Guide to Joinder of Employee Benefit Plans
California community property division law provides certain mechanisms for dividing real property, bank and investment accounts, retirement accounts, and pension plans. This page focuses on the division of pension retirement assets in divorce and legal separation cases in Orange County, California. Our attorneys have spent years dealing with complex issues of dividing pension and other defined-benefit plan retirement assets in divorce cases.
This page is intended to provide a basic understanding of what you, a divorcing litigant, should know about how the family law judge in the Orange County superior court will handle the division of a defined benefit asset in your divorce.
Community Property Pensions v. Separate Property Pensions
The first step in the explanation of how pension retirement assets are divided in California family courts is to understand the difference between community and separate interests. Community property includes assets that are acquired during marriage from sources that are not separate. Separate property includes assets that are acquired before marriage, after separation, or by gift, bequest devise or inheritance, and all appreciation and accumulations that result from that separate property. Community property is divided equally between the parties and separate property is awarded to the party that owns the separate property. Thus, the community property portion of defined benefit retirement assets, which is the portion acquired from the date of marriage until the date of separation, will be divided equally between the parties upon divorce.
In most circumstances, an employee-spouse begins working and acquiring benefits for their pension or defined benefit asset before marriage. Then during marriage, they continue to acquire benefits. As a result, the pension benefit is partly separate property and partly community property. Only the community property portion of the benefit will be divided equally.
You should also be aware that Social Security Benefits are separate property as mandated by federal law. Those benefits are NOT divided in a divorce case. For more information, click here.
Understanding Pensions and Defined Benefit Plans
There are numerous kinds of pension and defined-benefit plans that are acquired by spouses living and working in California through their employment. Most people that work in the private sector earn a base salary, commissions, bonuses, profit sharing benefits, 401(k) benefits, stock, stock options and/or restricted stock units (RSUs), but not defined benefit assets. If they do receive such benefits, they are called defined contribution plans and the employer determines what to give the employee; they are not fixed plans. Most government positions including local and state jobs have a defined benefit component to compensation. Defined benefit plans provide a fixed, pre-determined benefit for the employee upon retirement. The asset is valued by the amount of the benefit that will be paid at retirement. This is an important concept to understand in California community property law, because when spouses go through a divorce they often try and place a value on a pension or other defined benefit employment asset. For an IRS discussion about defined benefit plans, click here. Common types of defined contribution plans in California include:
- City pensions
- Public Employees Retirement System (PERS) – Called CalPERS
- Teachers and Educators Retirement System (STRS) – Called CalSTRS
Are Parties to Divorce Required to Join a Pension Plan?
In some cases, yes. For example, some pension plans (also called employee benefit plans) will not comply with a court order to divide a pension asset unless they are joined in the case. It is very important to research the pension plan rules for any plan involved in your case, whether you are the employee-spouse or non-employee spouse.
What forms are need to Join a Pension or Employee Benefit Plan?
There are several forms that are required to join a pension or employee benefit plan in a divorce case. Technically, when a pension plan is joined to a divorce case they actually become a party to the case, so it is important that the proper forms and procedures to join the plan are followed. In short, pension plans are joined to a case by a request for joinder. The documents are completed and filed with the court clerk, which will issue a Summons that will notify the plan that they are now a party to the case. Fortunately, the procedures are now streamlined so that a hearing on the joinder request is no longer required to join a pension plan or employee benefit plan.
The forms recommended / required include:
- Information sheet on Retirement Plan Joinder, Form FL-318-INFO
- Pleading on Joinder – Employee Benefit Plan, Form FL-370
- Notice of Motion and Declaration for Joinder, Form FL-371
- Request for Joinder of Employee Benefit Plan, Form FL -372
- Summons (Joinder), Form FL-375
- You also need to serve a copy of the plan according to the law. The “proof of service” must be filed with the court.
- A blank Responsive Declaration to Motion for Joinder – Consent Order of Joinder, Form FL-373 must also be served.
What is a “Claimant” in a Joinder for an Employee Benefit Plan in California Divorce?
The “claimant” is the actual employee benefit plan (pension) that is being served with the joinder request in the context of our discussion. In general, any person or entity that is being sought to participate as a joined party in any civil case is called a Claimant.
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. If you or your spouse is employed by a non-government company and has rights to a defined contribution plan, ERISA may play a role in your case to a limited extent because the order to divide the asset in your divorce case must comply with ERISA law. As explained below, most family law attorneys will have their clients retain an expert in defined benefit plan division orders (called QDROs) to divide these assets, so there is not a significant amount of information you need to worry about regarding ERISA.
What does “Joining an Employee Benefit Plan” Mean?
Joinder refers to a legal action in a pending civil case (including divorce cases) where a third person or entity is “joined” to the case as a party. There are specific circumstances and reasons that a third party or entity would be joined to a divorce case.
Usually, joinder occurs when one party (or the third party) files a motion with the court requesting the joinder. The court will entertain joining another party or entity when it would be essential to the case for the joinder to occur, like in the following situations:
- When a third party (not the parents) has custody of a child;
- When a third person is holding title to an asset that is really owned by the parties;
- When a business or other asset is transferred to a third party in the anticipation of divorce; or
- When a pension plan is involved.
So “joining” an employee benefit plan occurs when the court makes the pension plan administrator a party to the court case. In divorce cases, the joinder of an employee benefit plan is extremely common and is much less litigious than when another third party is involved. Employee benefit and contribution plans are joined in divorce cases every day across California and the process is relatively simple to join a plan. Unlike situations where other third parties are involved and it is up to the court to determine whether the person or entity should be joined based on necessity, employee fixed benefit plans are automatically joined upon request of a party and the filing of the appropriate paperwork.
What is the Procedure for Joining a Defined Benefit or Contribution Plan?
The process to add a pension administrator or defined benefit plan to a divorce action is governed by statute and there are forms that are required in every case.
Joining a plan is extremely important in some cases. Absent a joinder of the plan, any order against them is not valid. Family Code 2060(a) states that upon written application by a party, an employee benefit plan that either party claims an interest shall be joined by the Orange County Family Court clerk. The word “shall” is important to connote that the joinder is mandatory in all cases.
The forms to demand joinder have already been created and are readily available to the requesting party. You will need such information as the party’s name, Social Security Number for the plan participant, plan number, name of the plan, and the contact information for the plan administrator.
Family Code 2062 requires the joinder to be served on the plan administrator. Essentially, you’ll need to give them all the filed joinder pleadings and make sure to include the Summons that is specifically created for employee benefit plans. When the joinder is served on the plan (in the appropriate fashion), the plan will be required to file an answer within 30 days – it is important that if you are serving the plan that you provide a blank response form to the plan administrator or else the service is not valid.
Why is it Important to Join an Employee Benefit Plan to a Divorce Case?
In cases where the employee spouse is the age of retirement, or close to retirement, or in cases where the spouse has the ability to take loans against his or her interest in the benefit plan assets, or where the employee spouse has the ability to withdraw funds, or finally in cases where the employee spouse is already receiving monthly benefit payments, it is usually imperative to join the plan. The reason is simple: to protect the non-employee spouse’s interest in the plan benefits. Considering that the non-employee spouse’s interest is one-half of the total benefits accrued during marriage, the interest could be significant.
For more information about joining employer-provided benefit plans in divorce or legal separation cases, please contact our office today. Our lawyers have experience in this area and provide a free, no-hassle initial consultation. We provide free parking and our office is conveniently located in Irvine, across the street from the John Wayne Airport.