TITLE: CONCERNING THE FORMULAE BY WHICH PUBLIC EMPLOYEE RETIREMENT BENEFITS MAY BE DIVIDED PURSUANT TO COURT-APPROVED AGREEMENT ENTERED INTO BETWEEN PARTIES TO A DOMESTIC RELATIONS ACT.

STATE FISCAL IMPACT SUMMARY	FY 1998/99	FY 1999/2000
State Revenues General Fund Other Fund
State Expenditures General Fund Other Fund
FTE Position Change	None	None
Local Government Impact — None

This bill allows parties to a domestic relations action to submit a written agreement regarding the division of public employee retirement benefits between the parties to the plan administrator at the time of the dissolution of marriage, legal separation, or declaration of invalidity, or at the time the benefit payments become payable. The bill requires the agreement to contain only one method or formula to be applied to divide the defined benefit plan. The bill allows the parties to select one of the following methods;

• a formula based upon the participant’s years of service at the time of the decree; or

The bill will become effective at 12:01 a.m. on the day following the ninety-day period after adjournment sine die of the General Assembly, or on the date of the official declaration of the vote of the people as proclaimed by the Governor, if a referendum petition is filed pursuant to Article V, Section 1 (3) of the State Constitution.

The bill will not affect state or local government revenue or expenditures. The bill may affect administrative costs of the Public Employee’s Retirement Association (PERA), and the Fire and Police Pension Association (FPPA). Therefore, the bill is assessed as having a conditional statutory public entity fiscal impact.

Current law allows parties to a domestic relations order to agree to divide public retirement system benefits, provided that the amount payable to the alternate payee (former spouse) is specified in a certain manner.

This bill adds the “time-rule formula” based upon the date of retirement. This new provision is anticipated to create a minimal amount of new administrative responsibilities for PERA.

The bill also allows “any other method or formula mutually agreed upon by the parties” to be applied to divide the benefit plan. This provision could include a variety of methods or formulae which could be subject to dispute or difficult to verify. If “any other method” used would cause the amount payable to the alternate payee not to be specific and readily determinable, PERA would experience significant administrative costs to modify forms, modify computer programming, determine the amount to be paid, and possibly respond to litigation. These additional administrative costs have not been estimated.

PERA believes the additional administrative costs identified above can be absorbed within existing resources. The bill will not affect employer or employee contribution rates, or the current period for amortizing the unfunded actuarial accrued liability. The total payment from PERA to the participant and alternate payee would not be affected by these proposed methods.

The provisions of this bill will increase FPPA administrative costs for defined benefit plans. The FPPA would be required to amend the standard form for domestic relations orders which is made available to all members, employers, and attorneys. The bill may also affect FPPA legal costs for reviews required for the affected defined benefit plans to determine whether each division has a proper basis in state law. The use of “any other method” may lead to disagreement among the parties and defined benefit plans as to what constitutes a proper division. These disagreements could lead to additional litigation. The amounts of these additional administrative and legal costs have not been estimated.

This fiscal note would imply that no new state spending authority or appropriations are required for FY 1998-99 to implement the provisions of this bill.

Personnel Public Employee’s Retirement Association Fire and Police Pension Association