The share of a member’s retirement benefit paid to the alternate payee pursuant to a DRO is reported to the Internal Revenue Service as income paid to the alternate payee.

Payments of a retired member’s retirement benefit cease upon the retired member’s death. Payments of a share of that retirement benefit to the alternate payee accordingly cease as well. In order for an alternate payee to continue to receive payments from the System, the retired member must have elected a survivor benefit at the time of retirement in favor of the alternate payee.

Payments of an alternate payee’s share of a retirement benefit cease upon the alternate payee’s death. Following the death of the alternate payee, the entire retirement benefit is thereafter paid to the retiree. If the alternate payee had been designated the beneficiary of a joint and survivor benefit at retirement, no payments are made following the death of the retired member. On the other hand, if the alternate payee had been designated the beneficiary of a guaranteed or lump sum option, the retired member may designate another beneficiary or other beneficiaries to receive any payment, if any that is made upon the subsequent death of the retired member.

As noted above, a post-retirement death benefit may be payable upon the death of a Tier 2, 3 and 4 member following retirement. The amount payable will typically be very modest. If the alternate payee has survived the retired member and the DRO on file with the System specifically provides for the alternate payee to share in the member’s death benefit, the System will pay the alternate payee his/her share of that benefit.

Practice Pointer: As already stated, New York law requires a DRO must specifically provide for the payment of a portion of a member’s death benefit in order for the alternate payee to share in a death benefit provided by a retirement plan. Language dividing a plan participant’s retirement benefit is not sufficient to require a division of a death benefit payable under the terms of the plan. However, if the DRO provides for an alternate payee to share in a NYSTRS member’s death benefit, the alternate payee who survives the retired member will be entitled to share in the post-retirement death benefit pro tanto, unless the DRO specifically provides that the alternate payee is not entitled to share in any post-retirement death benefit or that the alternate payee’s right to share in the member’s death benefit is restricted to the death benefit payable prior to the member’s retirement.