Government pension plans such as the Arizona State Retirement System (ASRS), Arizona Public Safety Personnel Retirement System (PSPRS), the Arizona Corrections Officers Retirement Plan (CORP), and the Arizona Elected Officials Retirement Plan (EORP) are not governed by the QDRO rules under the IRS Code or ERISA. The Arizona Revised Statutes do provide that, upon divorce or legal separation, the retirement benefits under any of these systems are subject to division pursuant to the community property laws of Arizona.

Benefits under any of the retirement systems mentioned will not pay a benefit until such time as the employee/member actually qualifies for and applies for benefits. This raises several questions as to how to deal with this sensitive issue. It is important that your pension attorney understand under what systems is a former spouse even eligible to be named as a survivor annuitant in the event the member dies either before or after retirement. For example, if a member under the PSPRS dies during retirement, the benefits to the former spouse cease. It may be wise to require an establishment of a life insurance policy in order to protect income loss from the former spouse in the event the member spouse dies.

One of the most misunderstood portions of the PSPRS is the nature of the deferred retirement option plan (DROP). When a member is eligible to retire he can enter into the DROP wherein his/her monthly pension amount will be deposited into an account even though he/she continues to work. If a member enters into the DROP, he/she no longer accrues pension benefits. The pension attorney must be aware of DROP and make an appropriate provision in the court order dividing the Pension Plan in order to allocate the community property interest in these funds.

The pension attorney must also know how to deal with the purchase of prior military service, transfers between different state retirement systems and the cost-of-living adjustments. The Public Safety Personnel Retirement System is a very complex system, and your pension attorney must be sophisticated enough to protect your interest.

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