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Alternate Payee dies before QDRO. Does his estate have a valid recovery claim?

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Meeting with ex-W tomorrow.  She is plan participant, age 65, retired.  She and ex-H divorced 10 years ago, both pro se.  Judgment provided for division of her retirement account, but no QDRO was ever drafted.  Husband died recently.  Daughter of couple is designated as beneficiary.    Estate is seeking to recover portion of W's retirement account based upon divorce judgment.  Valid claim?

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From a federal QDRO law perspective (also the retirement plan's perspective), it is possible depending on the nature of the plan,  the attitude and sophistication of the plan administrator, and the actual terms of the divorce judgment.  There is a lot to be done behind the claim to get it in proper position, probably including getting a domestic relations order that satisfies the QDRO requirements, which will be determined by state law.  Generally no action will be taken by state courts with respect to a concluded divorce proceeding after the death of one of the parties, but never say never.   The domestic relations order is merely in aid of carrying out the terms of the divorce judgment, which is one reason why those exact terms are critical.  The plan administrator may have views about the original terms as well for purposes of accepting and effecting a domestic relations order. 

The divorce judgment is also a domestic relations order, but I use the term in this case to refer to another domestic relations order directed specifically at the retirement plan and benefits.  I have also assumed that the divorce judgment would not satisfy the QDRO requirements.    

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Thank you QDROphile.  I will see the judgment tomorrow.  From the telephone conversation I had it sounds as though  the terms in their agreement  is convoluted and perhaps contingent upon events that may not yet have occurred even at this late date.

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If the husband's estate will be asking the Plan to make retroactive payments to an Alternate Payee's estate that have already been paid out to the Participant,  I don't think that can happen.  See Patterson v. Chrysler Group, LLC, 2016 U.S. Dist. LEXIS 18862 (E.D. Mich. Feb. 17, 2016), holding that a Nunc pro tunc QDRO entered by a State court trumps ruling of Plan Administrator that the “QDRO” submitted did not satisfy ERISA requirements so as to make it acceptable as a valid QDRO that the Plan was required to implement during the lifetime of the Participant.  The Participant had retired, elected a single life annuity, received his retirement benefits during his lifetime, and died before any QDRO was approved by the Plan Administrator. Three DROs were submitted to the Plan Administrator, the last one “nunc pro tunc”, seven years after his death.   All were rejected as being not “qualified” under ERISA.  Nothing was ever paid to the Alternate Payee.  The District Court decided that even though the Participant received everything he was entitled to under his “single life annuity” election and there was nothing left for the Alternate Payee, nevertheless the third nunc pro tunc  (to the date of retirement) QDRO, entered post mortem, was valid and that the Plan owed the Alternate Payee her marital share of the deceased Participant’s already paid out benefits.  This is not a Pension Protection Act of 2006 situation that would permit a post mortem QDRO.  Given the many cases dealing with Federal preemption, I don’t see how this ruling can survive an appeal.   Some of the cases were cited by the Court  as follows:

“In other words, the dispositive issue is whether a state court's designation of a DRO as a nunc pro tunc order must be given effect when evaluating whether the DRO meets ERISA's qualification requirements. Neither the Sixth Circuit nor the Supreme Court has resolved this issue. Persuasive authority on the issue is split.  Compare Payne v. GM/UAW Pension Plan, No. CIV.A. 95-CV-73554DT, 1996 WL 943424, at *8 (E.D. Mich. May 7, 1996) (unpublished) (holding nunc pro tunc DRO qualified); Patton v. Denver Post Corp., 326 F.3d 1148, 1152 (10th Cir. 2003) (finding Payne persuasive on validity of state court use of the nunc pro tunc doctrine to render DRO compliant with ERISA's qualification requirements); Yale-New Haven Hosp. v. Nicholls, 788 F.3d 79, 86 (2d Cir. 2015) (holding nunc pro tunc DROs qualified because, under the nunc pro tunc fiction, they assigned benefits to plaintiff before those benefits vested in someone else), with Samaroo v. Samaroo, 193 F.3d 185, 191 (3d Cir. 1999) (declining to follow Payne, stating that the facts in Payne serve as an example of potential abuse of a nunc pro tunc DRO, and holding that a DRO's effect on an ERISA plan was a matter of federal law and thus not affected by the state court designating it nunc pro tunc); Yale-New Haven Hosp., 788 F.3d at 92 (Wesley, J., concurring and dissenting) ("I am aware of no legal authority that permits a state court to issue an order and adopt a legal fiction about the order's existence earlier in time such that the state order so easily thwarts the intricate federal statutory scheme surrounding the antialienation of pension benefits.").”

My prediction about the survival of this decision was correct, but for the wrong reasons.  On January 11, 2017, the U.S. Court of Appeals for the 6th Circuit, in Case No. 16-1365, reversed the District Court’s decision on statute of limitations grounds.  The opinion is worth reading.  You can find it at:
https://caselaw.findlaw.com/us-6th-circuit/1765406.html 

Part of the opinion was as follows:

“As in other states, Michigan court orders issued nunc pro tunc do not retroactively modify substantive rights declared in older court orders. See Sleboede v. Sleboede, 184 N.W.2d 923, 925 (Mich. 1971). Rather, they merely "make [the court's] records speak the truth—to record that which was actually done, but omitted to be recorded." Id. at 925 n.6. That is, nunc pro tunc orders fix clerical mistakes in old orders. Nunc pro tunc orders do not revise the substance of what has transpired, backdate events, or give rise to new substantive rights, including resetting the statute of limitations. Crangle v. Kelly, 838 F.3d 673, 680 (6th Cir. 2016) (finding that Ohio nunc pro tunc orders "merely correct[] . . . record to accurately reflect the court's actions . . . not . . . reset[] the statute of limitations . . . ."); Glynne v. Wilmed Healthcare, 699 F.3d 380, 383-84 (4th Cir. 2012) (holding that nunc pro tunc orders "correct mistakes or omissions in the record so that the record properly reflects the events that actually took place. [They] may not be used to retroactively record an event that never occurred or have the record reflect a fact that never existed."); W.N.J. v. Yocom, 257 F.3d 1171, 1172 (10th Cir. 2001) (holding nunc pro tunc orders cannot be used to rewrite history); Central Laborers' Pension, Welfare and Annuity Fund v. Griffee, 198 F.3d 642, 644 (7th Cir. 1999) ("[T]he only proper office of a nunc pro tunc order is to correct a mistake in the records; it cannot be used to rewrite history."); Walls v. United States, No. 2:06-CV-12441, 2006 U.S. Dist. Lexis 93850, at *1 (E.D. Mich. Dec. 29, 2006) (same).

“Furthermore, accepting the district court's view would create an untenable situation regarding submission of domestic-relations orders to pension plans. Under this view, no matter how long ago a plan denied a domestic-relations order, the denied claimant could circumvent the statute of limitations and revive his cause of action by obtaining and submitting a nunc pro tunc version of the denied order to the pension plan, force the plan to reiterate its denial, and effectively reset the statute of limitations. In such a world, no claim would ever truly be time barred, but merely waiting for a nunc pro tunc order to issue. Such a system defeats the clearly understood policy goals of statutes of limitations. See Order of R.R. Telegraphers v. Ry. Express Agency, Inc., 321 U.S. 342, 348-49, (1944) (noting that statutes of limitation are designed "to promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared."); Carey v. Int'l Bhd. of Elec. Workers Local 363 Pension Plan, 201 F.3d 44, 47 (2d Cir. 1999) (stating that statutes of limitation serve to encourage "rapid resolution of disputes").

“Therefore, we reverse and hold that the Nunc pro tunc  Order did not give rise to a new cause of action, or reset the statute of limitations.”

The fact that the Plan Administrator had already paid out 100% of the Participant’s entitlement by the time the QDRO was presented was not a factor.   Or maybe the Court of Appeals was just looking for a way to dodge the issue.  Suppose the Participant selected a life annuity and died after 3 years, that is, before the expiration of the Statute of Limitations.  The Court would have had to deal with the question of whether or not the nunc pro tunc Order issued by the State Court trumped ERISA.   They had a back door out of this question in this case.  Let’s see what happens in the next case.

Back to the case presented,  the Alternate Payee's estate should be able to go directly against the Participant.  The obligation to share a pension benefit exists whether or not a QDRO is ever entered.  The QDRO is merely an enforcement tool for the court to implement its Judgment of Divorce.  But you still have to worry about such defenses such as res judicata (finality) and laches (delay in protecting one's rights).   And the deceased Alternate Payee's claim may have abated on his death under State law.  Interesting situation.

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Divorce order could satisfy requirements to be a QDRO but it is unlikely if they were both pro se.  Post-death DRO could be entered under DOL regs. See 29 CFR 2530.206(c), Example (1).

See Boggs v Boggs, 520 US 833 (1997) regarding a claim of the estate of an ex-spouse against the pension of the participant spouse without a QDRO. https://supreme.justia.com/cases/federal/us/520/833/

 

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