Simplified Guide to Dividing CalSTRS before Retirement

This guide aims to provide a clearer understanding of how to approach dividing CalSTRS benefits in the context of a divorce or legal separation, tailored to personal circumstances and future needs. 

CalSTRS provides lifetime retirement benefits to teachers, funded by contributions from employees, employers, and investment earnings. The California State Teachers’ Retirement System (CalSTRS) provides retirement benefits to educators and includes three main components: 

Defined Benefit Program - The primary pension plan based on service years and salary. 

Defined Benefit Supplement Account - Provides additional benefits through extra contributions. 

Cash Balance Benefit Program - Available in some cases, this functions like a personal retirement account. 

When a CalSTRS member is not yet retired, the retirement benefits can be divided between the member and their ex-spouse (nonmember) in two ways: 

Model A - Segregation Division 

How It Works: The ex-spouse receives a fixed percentage (usually 50%) of the retirement benefits earned during the marriage. This portion is segregated and managed independently from the member’s account. 

Benefits Start: The ex-spouse can access these benefits once the ex-spouse is age 55, or earlier if the member isn't fully vested (has less than five years of service) or just wants a refund of contributions with interest. If the ex-spouse withdraws a refund of contributions with interest, the member is allowed to redeposit those contributions to increase the member’s monthly benefit. 

Calculation Details: The benefits are based on the ex-spouse's awarded service years, their age at retirement, and the member’s highest average salary earned during any 12-or 36-month period before the date of separation. The payments include cost-of-living adjustments (COLAs). 

Model B - Shared Interest Division 

How It Works: The ex-spouse is awarded a percentage (almost always 50%) of the marital interest for the DBP account. The marital interest is determined by the "Martial Fraction" (also known as the "Time Rule formula"). The Marital Fraction is generally the credits accrued from the date of marriage up to the date of separation over the total credits at retirement. Also,  the ex-spouse is also awarded 50% of the marital interest in the DBS Account and any Cash Balance Plan. 

Benefits Start: Payments to the ex-spouse begin when the member retires and starts receiving their pension. This includes COLAs and often a survivor benefit, which could reduce the payment amount. The result is the ex-spouse is paid a share of each payment that is paid to the member.

Legal Framework 

Ex-spouses have the right to decide between these models based on California Family Law and specific legal precedents. [CA Family Law Code 2610(a)(3)(B) and In re Marriage of Colvin (1992) 2 Cal.App.4th 1570, 4 Cal.Rptr.2d 690]. This choice should be informed by the circumstances of their divorce and financial needs. 

Tips for Choosing the Division Method 

Segregation Division - Consider If: 

  • You seek simplicity and independence in managing retirement benefits. 
  • The member has left their teaching position and won't return, fixing the salary at the time of departure. 
  • You are near or above 55 years old at the time of divorce, and you want to start receiving benefits soon. 
  • The marriage duration contributing to CalSTRS is short, and you prefer to manage your funds separately. 
  • If you are in poor health and need to access funds sooner. 

Shared Interest Division - Consider If: 

  • You prefer to wait for the member to retire to potentially receive a larger benefit reflecting salary increases. 
  • You are under age 55 and the member is over age 55 and about to retire so the ex-spouse can start receiving a share of the member’s monthly benefit and not have to wait until the ex-spouse reaches age 55. 
  • If the member passes away and a refund of contributions is available, this model might provide continuous benefits through a survivor option if the member died married. Or under this method, the ex-spouse could return to court to modify the ex-spouse’s  award to a Segregation Division. 
  • If you are in poor health and want your share to revert back to the member. 

Additional Support - CalSTRS offers benefit estimates for both methods, crucial for informed decision-making. Consider factors such as employment duration, health conditions, and anticipated retirement plans. For help obtaining a CalSTRS estimate and/or to speak with a QDRO Expert regarding the two division methods, contact QDROCounsel at (833) 355-7376.  

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