UC 403(b), 457(b) and DC Plan Accounts: The Separate Order

If a UC employee is divorcing in California, the 403(b), 457(b) and Defined Contribution Plan accounts are not divided by the order that divides the UCRP pension. The University of California requires a separate domestic relations order for its Retirement Savings Program plans. California law then divides the community-property share of those accounts equally between the spouses.

Most people facing this question have just opened a UC benefits statement and found more than one retirement account on it: a pension, plus one or more savings accounts with their own balances. Some are UC San Diego faculty, researchers, clinicians or staff; others are the spouse who moved to La Jolla when the appointment came through and now wants to know what part of those accounts belongs to the marriage. The worry is usually practical. Which paperwork covers which account, who has to sign it, and what gets missed if only the pension is handled?

This page explains what the separate order is, how the community share is identified, the steps UC sets out for its plans, what happens to UC health coverage when the judgment becomes final, and where a La Jolla case is filed.

Why UC Savings Plan Accounts Need Their Own Order

UC's own fact sheet states the rule directly: to divide UC Retirement Savings Program benefits, meaning the Tax-Deferred 403(b), Defined Contribution and 457(b) Deferred Compensation Plans, "you'll need a separate DRO." A DRO, or domestic relations order, is the court order that tells a retirement plan how to pay a share of a member's benefits to a former spouse. UC describes it as "a legal document that UC has determined to be acceptable ('qualified') under UCRP's rules."

The pension and the savings plans are different things. The UC Retirement Plan, called UCRP, is the pension. UC's DRO fact sheet says it "applies only to UCRP and Capital Accumulation Payment (CAP) benefits." The three savings plans sit outside that order. A judgment that divides UCRP alone leaves the savings accounts undivided as a matter of UC's paperwork, even when the parties meant to split everything.

The name of the order matters too. UC's fact sheet says UCRP "is generally not subject to the rules of the Employee Retirement Income Security Act of 1974 (ERISA)," the federal law that governs many private-employer plans, and that "it is not appropriate to use these citations in drafting the domestic relations order." Private plans are often divided by a qualified domestic relations order, or QDRO, which is an ERISA concept. UC uses its own DRO, judged acceptable under its own rules. That is why this page calls UC's order a DRO throughout.

Underneath UC's procedure sits California property law. Family Code section 2550 provides that, "except upon the written agreement of the parties, or on oral stipulation of the parties in open court, or as otherwise provided in this division," the court "shall... divide the community estate of the parties equally." The DRO is the tool that carries out that equal division for the community share of each savings plan account. The broader rules appear in the site's overview of community property for UC households.

The question comes up often here for a simple reason. UC San Diego's main campus is in La Jolla, and its campus profile states that "UC San Diego is the largest employer headquartered in San Diego County." Many La Jolla divorces involve at least one spouse whose retirement savings sit in these plans.

What the Three UC Savings Plans Are

UC groups all three accounts under one heading, the UC Retirement Savings Program. Its fact sheet names them as the Tax-Deferred 403(b) Plan, the Defined Contribution Plan and the 457(b) Deferred Compensation Plan. A UC employee may hold one, two or all three, and each shows up separately on a benefits statement.

• Tax-Deferred 403(b) Plan. A retirement savings account named, as its title says, for tax-deferred saving.
• Defined Contribution Plan. A savings account within the Retirement Savings Program, distinct from the UCRP pension.
• 457(b) Deferred Compensation Plan. A deferred compensation account, also within the Retirement Savings Program.

For divorce purposes, the shared point is the one already made: each belongs to the Retirement Savings Program, and the Retirement Savings Program is divided by a DRO separate from the UCRP order. Contribution rules, investment choices and eligibility details for each plan are set by UC, and a plan statement is the place those details appear for a given account.

UC's fact sheet also lists benefits that cannot be divided at all, and these sometimes surprise people sorting through a UC benefits file:

• "Personnel-related benefits, including accrued sick leave and vacation, cannot be divided," and the DRO "cannot include" them.
• "UCRP disability income is separate from retirement income and may not be divided; the alternate payee is not entitled to any portion of a member's disability income." (An alternate payee is the person, often a former spouse, whom the DRO recognizes as entitled to part of the member's benefits.) The fact sheet adds that once a disabled member reaches the earliest Plan retirement age, the retirement options for the alternate payee become available.
• "Survivor benefits are not payable to an alternate payee or alternate payee's beneficiary(ies)." If the alternate payee dies before the member, the fact sheet says the alternate payee's benefit "does not revert to the member."

These limits come from UC's rules for its plans. They describe what a DRO can and cannot do inside UC's system.

How the Community Property Interest Is Calculated

Family Code section 760 sets the starting point: "Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property." Contributions placed in a UC savings account during the marriage, while the couple lived in California, generally fall inside that rule, along with what those contributions earned.

The other boundary is the date of separation. Family Code section 771(a) provides that "the earnings and accumulations of a spouse... after the date of separation of the spouses, are the separate property of the spouse." So contributions made from a paycheck earned after separation generally belong to the employee alone. In broad terms, the community share of a UC savings account is what was built up from the date of marriage to the date of separation, while the couple was domiciled in California. Money saved before the marriage, or after separation, sits on the separate side of the line.

For a spouse who relocated for a UC appointment, that "while domiciled in this state" phrase can matter. Savings built while the couple lived in another state are not swept in by section 760's text, but that does not by itself keep them out of a California division. Under Family Code section 125, property a spouse acquired while domiciled elsewhere is "quasi-community property" if it would have been community property had that spouse been domiciled in California when it was acquired. Section 63 makes quasi-community property part of the community estate, which section 2550 generally requires the court to divide equally in a divorce or legal separation.

Identifying the community share is one question; putting a value on it is another. The two are easy to blur. Family Code section 2552(a) says the court "shall value the assets and liabilities as near as practicable to the time of trial." Under section 2552(b), on 30 days' notice, the court "for good cause shown may value all or any portion of the assets and liabilities at a date after separation and before trial to accomplish an equal division of the community estate of the parties in an equitable manner." The date of separation marks which contributions are community; it is not the default valuation date.

UC then does its own arithmetic. Its fact sheet says that once the Plan Administrator has received all required documents, "the division is calculated," and "the calculation may take up to 45 business days." That period belongs to UC's process, not to the court's.

The Joinder and DRO Process for UC Savings Plans

UC's fact sheet lays out the steps in order. Each one involves either the court handling the divorce or UC's Special Claims unit.

1. The joinder. The first step is to "file a joinder with the court handling the divorce, separation or termination and send it to Special Claims by mail or fax." A joinder formally adds UC's retirement system as a party to the case, which lets the court make orders that bind the plan. UC states that "in the joinder, the UC Retirement System (UCRS) must be named as the claimant." Because UCRS includes UCRP and the Retirement Savings Program plans, naming UCRS "allows you to avoid the expense of a separate joinder filing for each plan." One joinder covers the pension and the savings plans, even though each type needs its own DRO. The fact sheet also notes that a joinder is not required if the case is filed in a court outside California, though Special Claims must then be notified in writing if a restriction is to be placed on the member's UCRP benefit.

2. The packet from Special Claims. UC sends an information packet on request, and "the packet will be sent within 60 days after Special Claims receives the request." UC adds a caution: "the division in the packet is only an estimate. The final division will be determined by the parties and the court."

3. The DRO itself. The order has to be one UC "has determined to be acceptable ('qualified') under UCRP's rules." That is UC's standard, not ERISA's, and the fact sheet warns against drafting the order with ERISA or Retirement Equity Act citations. Savings plan accounts need their own DRO; the UCRP order does not reach them.

4. UC's calculation. After the Plan Administrator has all required documents, the calculation "may take up to 45 business days."

One rule in the fact sheet applies specifically to the pension side. If the member is already retired, "UCRP will withhold 50 percent of the member's monthly benefit while the matter is pending, unless the parties instruct the Plan otherwise in a notarized statement signed by both parties." That rule concerns the monthly UCRP benefit. The savings plans follow their own separate-order process, and the fact sheet's withholding rule does not describe them.

People handling their own case sometimes look to the court's free help. The San Diego Superior Court's Family Self Help Center describes its Family Law Facilitator's Office as providing help "at no cost" to people without lawyers, and it lists Qualified Domestic Relations Orders (QDROs) among the services it does not provide. The same Family Self Help Center page states that the Facilitator's Office does not assist parties who have an attorney of record on file, and that its attorneys are neutral court employees who do not represent any party. The site's divorce planning checklist places the joinder alongside the other early steps in a La Jolla case.

Health Coverage After the Divorce Is Final

For the spouse who is not the UC employee, this section often carries as much weight as the accounts themselves. UC's fact sheet says: "UC-sponsored coverage stops at the end of the month when the divorce, legal separation, or domestic partnership termination is final."

There is a continuation option. An alternate payee "seeking to continue group health coverage... may be able to do so for up to 36 months under COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1985)." The fact sheet points to the benefits representative at the member's UC location for more information.

Health coverage and the savings plan DRO are separate matters. The DRO divides account balances; it does not extend health coverage. They tend to surface together because both turn on when the judgment becomes final, and that date is governed by the waiting period described below.

Where La Jolla Cases Are Filed

The San Diego Superior Court assigns family cases to a division by ZIP code, and most family law cases from La Jolla ZIP codes are filed in the Central Division, at the Superior Court of California, County of San Diego, Central Courthouse, 1100 Union Street, San Diego, CA 92101. That is also the court in which the joinder naming UCRS is typically filed for a La Jolla case. The court's Family Self Help Center states that Family Law Facilitator offices are available in the Central Courthouse. Readers who have recently moved for a UC position can find the residence requirements in the site's page on residency to file.

Two statutory timelines shape the case from the start.

The six-month waiting period. Family Code section 2339(a) provides that no judgment of dissolution is final for ending the marriage "until six months have expired from the date of service of a copy of summons and petition or the date of appearance of the respondent, whichever occurs first." The clock does not start at filing. Under section 2339(b), the court may extend the period for good cause. Because UC-sponsored coverage ends at the end of the month the divorce is final, this date links directly to the health coverage question above.

Preliminary disclosure. Under Family Code section 2104(f), the petitioner serves the preliminary declaration of disclosure "either concurrently with the petition for dissolution or legal separation, or within 60 days of filing the petition," and the respondent does the same with the response or within 60 days of filing it. The parties may extend these periods by written agreement, or the court may by order.

If You'd Like to Talk Through How the Separate Order Fits Your Case

The savings plan order is easy to overlook because the pension tends to draw attention first. A conversation about it usually turns on a short list of facts: which of the three plans appear on the UC statement, when the marriage began and when the separation occurred, where the couple lived while contributions were made, whether a joinder naming UCRS is already on file, and how the timing of the final judgment affects UC health coverage. The firm practices California family law only, so questions about investments or taxes on the accounts belong with other professionals.

To talk through how UC's separate order applies to your situation, contact La Jolla Family Law Advocates to request a confidential consultation.