Our Fort Collins divorce attorneys regularly represent individuals who are government employees and divorcing. If you or your spouse works for Colorado State University, University of Northern Colorado, Larimer County or Weld County government then the Public Employees’ Retirement Association retirement plan needs to be carefully divided when divorcing.
Because PERA is “defined benefits plan” its value is very different from traditional retirement options such as a 401K or IRA which are “defined contribution plans.” With PERA, the employer will pay a monthly amount upon retirement depending on how long the employee worked, their age and their salary.
To determine the present day cash value of PERA benefits a CPA should be employed. The valuation method should conform with In re Marriage of Nordahl, as this case sets the precedent for how to value PERA benefits in Colorado divorces.
Caution is needed when reviewing statements from PERA as some of their standard boiler plate letters are deceiving. Upon the filing of a PERA release the beneficiary will receive a letter indicating what the lump sum payout would be should the participant wish to convert their PERA into another asset. The lump sum value provided is not an accurate reflection of the present day value of the benefit because the ongoing monthly benefits to be provided in the future are much more valuable than the present day value.
A PERA account may be divided into two PERA accounts through a Domestic Relations Order dividing the same. If a PERA account is going to be divided it must be done within 90 days of the divorce decree. If a PERA account is not divided within 90 days of the divorce decree then the decree may need to be vacated and reissued with a current date, and the consequences of having to reissue the decree can have significant consequences for taxes and other matters. Ensuring the PERA is divided within 90 days should be prioritized.
If one party is going to retain 100% of the PERA account, then no action is needed if the person awarded the PERA is the one who earned it. However, should the one being awarded the PERA account not be the one who earned it, then a Domestic Relations Order is needed to transfer it to the alternate payee.
While enrollment into PERA is mandatory, participation in the 401K option is not. While the 401K option should be valued as any other 401K, the division of the 401K component needs to be divided using the standard PERA agreement and Domestic Relations Order.
If you have decided to get a divorce, the next steps can seem daunting. Here we provide a few answers to common questions about filing for divorce.
Depending on your family, financial, and personal circumstances there are many factors you will want to consider when filing for divorce. Find out what type of divorce is right for you.
How long will it take for the Court to issue a Decree of Dissolution of Marriage? The earliest a Colorado court could issues the divorce decree is 91 days after the petition was filed. However it can take longer than 91 days, as expert valuations and reports may be needed.
How can a divorce attorney help with an uncontested divorce? Uncontested divorce generally means the parties have agreed upon all issues, or they believe they will be able to easily agree on all issues. A divorce attorney can help with an uncontested divorce by ensuring everything drafted properly.
What are mandatory financial disclosures? Financial disclosures are required of both parties in every divorce case, within the first 45 days after the petition has been filed. The exchange of mandatory financial disclosures is intended to put each party on a level playing field as it relates to the finances of the divorce.
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