1. (a) A "qualified domestic relations order" (QDRO) means a domestic relations order which creates or recognizes the existence of an alternate payee's right or assigns to an alternate payee the right to receive all or a portion of the benefits payable with respect to a member or retiree under a public retirement system, which directs the public retirement system to disburse benefits to an alternate payee, and which meets the requirements of Government Code, §804.003 and Internal Revenue Code §414(p)(1)(A)(i) and §414(p)(1)(B).
2. (b) The retirement system shall pay any eligible alternate payee who has a QDRO approved by the retirement system and who elects such payments, an amount that is the alternate payee's portion of the actuarial equivalent of the accrued benefit of the member of the retirement system, determined as if the member retired on the date of the alternate payee's election. The amount will become payable, upon receipt of a written request and a certified copy of a domestic relations order determined to be qualified, in accordance with the order, and in the form of an annuity payable in equal monthly installments for the life of the alternate payee.
3. (c) This method of distribution may be elected only when there is a member whose benefits are subject to partial payment under the law, who has not retired; who has attained the greater of either the age of 62 and is eligible to retire without reduction for early age retirement, or normal retirement age and service requirements for service retirement; and who retains credit and contributions in the retirement system attributable to that service.
4. (d) If an alternate payee elects to be paid under this section, the retirement system shall reduce the benefit payable by the system to the member or the member's beneficiary by the alternate payee's portion of the actuarial equivalent determined under this section.
5. (e) In figuring these benefits for the alternate payee and the adjusted standard annuity of the member's benefit as set forth in this section, the system shall consider the member's benefit as a normal age standard service retirement annuity, without regard to any optional annuity chosen or beneficiary designated by the member.
6. (f) The beginning of monthly payments under this section terminates any interest that the alternate payee who receives the payment might otherwise have in benefits that accrue to the account of the member after the date the initial payment to the alternate payee is made.
7. (g) An alternate payee who elects this method of payment has only a right to receive an annuity for life as calculated in this section and does not have the right to pass on any portion of his/her benefit upon his/her death. There is no reversion of the alternate payee's benefit to the member upon the alternate payee's death, irrespective of whether the death occurs before or after the member's benefit commencement.
8. (h) TRS will use Tables for Life Annuity Factors, Interest Annuity Factors, and Interest Accumulation Factors furnished by the TRS actuary of record.
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9. (i) To calculate the alternate payee's actuarial equivalent benefit, the following procedure will be followed:

   1. (1) Determine the member's accrued monthly benefit as of the alternate payee's benefit commencement date.
   2. (2) Determine the member's age and the alternate payee's age as of the alternate payee's benefit commencement date.
   3. (3) Determine the appropriate percent of the member's accrued benefit payable to the alternate payee under the terms of the QDRO.
   4. (4) Calculate the alternate payee's actuarial equivalent monthly benefit by multiplying the member's accrued benefit times the life annuity factor at member's age times the alternate payee's percent. Then, divide that figure by the life annuity factor at alternate payee's age.

10. (j) To calculate the member's adjusted standard annuity, there are two scenarios:

    1. (1) the alternate payee elects a monthly income and survives until the member annuity commencement date (MACD); or
    2. (2) the alternate payee elects monthly income and dies before the member annuity commencement date (MACD).
11. (k) When the alternate payee elects under subsection (j)(1) of this section, the formula used to reduce the member's standard annuity is the member's standard annuity monthly benefit amount minus the figure derived by dividing the total reserve for benefits to the alternate payee by the life annuity factor of the member at the member's age at MACD. The total reserve for the benefits to the alternate payee is the reserve for payments made to the alternate payee prior to MACD plus the reserve for payments made to the alternate payee after MACD. The reserve for payments made to the alternate payee after MACD is the alternate payee monthly benefit amount times the life annuity factor of the alternate payee at the alternate payee age at MACD. The reserve for payments made to the alternate payee prior to MACD is the alternate payee monthly benefit amount times the interest annuity factor to reflect payments of the number of payments before MACD.
12. (l) When the alternate payee elects under subsection (j)(2) of this section, the formula used to reduce the member's standard annuity monthly benefit amount is the member's standard annuity monthly benefit amount before the reflection of payments to the alternate payee under this section minus the figure derived by dividing the total reserve for payments made to the alternate payee by the life annuity factors of the member at the member's age at MACD. The total reserve for payments made to the alternate payee is the alternate payee monthly benefit amount times the interest annuity factor to reflect payment of the number of payments before death times the interest accumulation factor to reflect interest of the number of full months from the date of death of the alternate payee to the MACD.
13. (m) If the member dies before MACD and a standard annuity is used to calculate any benefit due after death, benefits payable on behalf of the member must be based on the member's adjusted standard annuity. The balance of the accumulated contributions in the member savings account payable to a beneficiary must also be adjusted to reflect the payment to the alternate payee by reducing the accumulated contributions in the member savings account by the QDRO percentage described in subsection (i)(3) of this section. A benefit of an amount equal to twice the member's annual compensation for the school year immediately preceding the school year in which the member dies, or twice the member's rate of annual compensation for the school year in which the member dies, payable under Government Code, §824.402(a)(1) and (2), or a lump sum payment of $2,500.00 plus an applicable monthly benefit as described in Government Code, §824.404, is not reduced by payments made to the alternate payee under Government Code, §804.005.
14. (n) If the member dies after MACD, the $10,000.00 lump sum survivor benefits or the $2,500.00 lump sum payment plus an applicable monthly benefit payable to a beneficiary under Government Code, §824.501 and §824.404, are not reduced as a result of payments to an alternate payee under this rule. Any payments paid pursuant to Government Code, §824.407 must be reduced by first reducing the account balance at the time of retirement by the QDRO percentage described in subsection (i)(3) of this section.
15. (o) If the member elects to terminate membership in TRS before MACD, the member contributions in the member account before a refund is processed, must be reduced by the QDRO percentage described in subsection (i)(3) of this section.
16. (p) When new law provides for an increase in the benefit payable to the member after the commencement of the payment of an annuity to the member, the increase will be distributed by increasing the member's and the alternate payee's benefit as provided by the law for an increase to the member's benefit so long as there is no additional actuarial cost to the system unless provided otherwise by the legislature.
17. (q) A person, who has previously withdrawn service that was reduced by a QDRO percentage as described in subsection (o) of this section and who wishes to reinstate the service, must deposit the amount withdrawn or refunded and the fees required by law. Benefits payable based even in part on the terminated service will be reduced as described in this section as if the service had not been terminated.
18. (r) When a member who has an alternate payee drawing benefits enters a Deferred Retirement Option Plan (DROP), TRS will use the adjusted standard annuity in the calculation for the member's DROP.
19. (s) When a member who is participating in DROP has an alternate payee to begin a distribution under the Government Code, §804.005, the retirement system will use the adjusted standard annuity to calculate all future DROP transfers beginning with the initial month that a distribution is payable to the alternate payee. When calculating the member's adjusted standard annuity, the amount of the annuity paid to the alternate payee that represents the annuitized portion of the DROP balance shall not be included in the calculation. TRS shall use only the portion of the payment to the alternate payee that represents the alternate payee's share of the monthly annuity.
20. (t) When a member who has an alternate payee drawing benefits elects a partial lump-sum option, TRS will use the adjusted standard annuity in the calculation for the member's partial lump-sum payment.

21. (u) In the event the total distribution amount awarded to the alternate payee in a QDRO is limited to a specific dollar amount, the following procedure will be followed to calculate the alternate payee's actuarial equivalent benefit:

    1. (1) Determine the alternate payee's age as of the alternate payee's benefit commencement date.
    2. (2) Calculate the alternate payee's actuarial equivalent monthly benefit by dividing the total distribution amount, as limited, awarded to the alternate payee by the life annuity factor at alternate payee's age.
22. (v) In the event the alternate payee dies prior to receiving the total limited distribution awarded to the alternate payee in a QDRO and before the MACD, calculate the member's adjusted standard annuity as described in subsection (j)(2) of this section.
23. (w) When a member who is participating in DROP has an alternate payee to begin a distribution under the Government Code, §804.005, TRS will calculate the alternate payee's actuarial equivalent benefit by multiplying the member's accrued benefit times the life annuity factor at member's age plus the balance of the DROP times the alternate payee's percent. That figure shall then be divided by the life annuity factor at alternate payee's age.
24. (x) When a member who is participating in DROP has an alternate payee to begin a distribution under the Government Code, §804.005, TRS will reduce the DROP account by applying the percentage of the member's accrued benefit payable to the alternate payee under the terms of the qualified domestic relations order beginning with the initial month that a distribution is payable to the alternate payee.

Source Note:The provisions of this §47.17 adopted to be effective April 21, 1999, 24 TexReg 3094; amended to be effective October 28, 1999, 24 TexReg 9300; amended to be effective March 12, 2003, 28 TexReg 2118; amended to be effective March 8, 2007, 32 TexReg 1097.