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Designated Beneficiary Has Survivor Rights Alientated in QDRO


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I am the second wife. I was designated as beneficiary on husbands plan when we married (2012), and one year later I became vested as the beneficiary (2013) In 2014 his ex wife got a QDRO in state court, designating her as surviving spouse. I objected as I did not sign waiver. She had not been awarded surviving spouse designation in their PSA,  it simply said 50% of the benefits accrued on the date of divorce.  The Plan administrator subsequently confirmed their view that the PSA itself was not a QDRO. The question is - who's survivor designation is correct? I am still the current beneficiary on the record of the plan.

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A former spouse gets nothing unless provided in a QDRO.  Unless the participant dies before the plan determines the QDRO, the QDRO can invade the "rights" of the second spouse.  The formula you describe is conventional and is not regarded as overreaching with regard to the second spouse.  This a bit complicated, and one could quarrel with the articulation, but you, as subsequent spouse, do not "vest" with repect to a QDRO until the participant dies.  As a matter of value judgment on my part, you have nothing to complain about if the former spouse is awarded half of the benefit accrued during the time of marriage to the first spouse, including the survivor benefit that goes with that half.

To get closer to your question, the terms of the QDRO determine the disposition of the survivor benefits.  As subsequent spouse and designated beneficiary, you have all of the survivor benefits that are left over after the QDRO alternate payee's survivor benefit (as expressed in the QDRO) is honored.  You may have some portion and the former spouse may also have a portion.

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I am not a lawyer, but the following is my understanding:

If the former spouse is being provided for under a QDRO, the second spouse has no rights with respect to the portion of the benefit covered by the QDRO.  No waiver is required from the second spouse - for all legal purposes, the former spouse is treated, with respect to the benefits assigned under the QDRO, as though he/she were the current spouse.  The fact that the court order was issued after your marriage does not deprive you of any vested rights - it preserves the rights of the former spouse.

To the extent that the total plan benefits exceed those assigned under the QDRO, you do have full spousal rights with respect to the excess.

When you speak of being "vested" in the plan's death benefits, I presume that you are referring to a provision in the plan requiring completion of a one-year period of marriage for there to be a pre-retirement death benefit. 

I agree that a property settlement agreement calling for the ex-spouse to be entitled to half of the then-accrued benefit does not constitute a QDRO, but if, subsequently, a court order was issued implementing that division, which the plan administrator accepted as a QDRO, then the terms of that order are in effect and restrict the rights of both the participant and you.  It is public policy that there be a legal mechanism to protect the rights of ex-spouses with respect to plan benefits earned during the marriage, and it would not make any sense to treat the interests of the current spouse as prevailing over the court-recognized rights of the ex-spouse.

Always check with your actuary first!

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  • 4 weeks later...

One of the important things not yet mentioned is whether or not your husband has commenced his benefit.  If he has not, then the former spouse can get a QDRO designating her as surviving spouse.  And although we may disagree with it, the courts can and often do, disregard the property settlement agreement when approving a QDRO.  It is up to the participant and/or AP to push the court to have it meet the prior agreement instead of providing the AP more or less then what they are entitled to.  

However, if your husband has already started his benefit, his form of payment cannot now be changed, no matter what kind of QDRO is issued.

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44 minutes ago, StaceyHelton said:

One of the important things not yet mentioned is whether or not your husband has commenced his benefit.  If he has not, then the former spouse can get a QDRO designating her as surviving spouse.  And although we may disagree with it, the courts can and often do, disregard the property settlement agreement when approving a QDRO.  It is up to the participant and/or AP to push the court to have it meet the prior agreement instead of providing the AP more or less then what they are entitled to.  

However, if your husband has already started his benefit, his form of payment cannot now be changed, no matter what kind of QDRO is issued.

Agreed that a QDRO should not be able to mandate a change in the form of payment if already in pay status.  However, that is not to say that a court couldn't impose a QDRO over the benefits being paid to divert specified parts of each payment to the former spouse (i.e., $300 per month is subtracted from the amount otherwise payable to the participant or, after the participant's death, otherwise payable to the surviving second spouse).  This would not be the kind of QDRO where the assignment makes the assigned piece the separate property of the first spouse.

Always check with your actuary first!

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2 hours ago, My 2 cents said:

Agreed that a QDRO should not be able to mandate a change in the form of payment if already in pay status.  However, that is not to say that a court couldn't impose a QDRO over the benefits being paid to divert specified parts of each payment to the former spouse (i.e., $300 per month is subtracted from the amount otherwise payable to the participant or, after the participant's death, otherwise payable to the surviving second spouse).  This would not be the kind of QDRO where the assignment makes the assigned piece the separate property of the first spouse.

Agreed that a shared payment QDRO could grant a former spouse a portion of the participant's benefit, however, once the participant dies, if a new spouse is receiving the surviving spouse benefit, there is no legal way to provide the former spouse any portion of that benefit.  

When I worked at PBGC, we had a case where a former spouse was trying to get most of the survivor's benefit from the new spouse, however, our QDRO ERISA attorney stated there was absolutely no legal way for that to happen, and that PBGC had litigated a similar case.  We refused and disqualified all QDROs that attempted to do so.

Edited to add link to PBGC case: https://www.gpo.gov/fdsys/pkg/USCOURTS-dcd-1_09-cv-01907/pdf/USCOURTS-dcd-1_09-cv-01907-0.pdf

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