Separate Interest
There are many pensions that do not require the former spouse to wait to start taking the pension until the employee spouse is retired. Under a separate interest QDRO, the benefit for the former spouse is “separated” from the employee spouse’s benefit. This means that the portion of the pension benefit that is awarded to the former spouse is actuarily adjusted for the life expectancy of the former spouse. Thus, if using the separate interest approach, electing a joint & survivor annuity should not be required by the employee spouse as part of the settlement agreement. The former spouse will already be eligible for survivor benefits based on the separate interest if s/he is predeceased by the other.
Additionally, the former spouse is able to make his/her own decisions regarding the timing and form of the benefit. For example, one spouse could take a lump sum distribution while the other may elect to receive the monthly benefit. Neither choice has an impact on the other spouse’s benefit. Each spouse is still bound by the rules of the plan administrator (in terms of timing and form of the benefit).
