Participant divorces spouse/alternate payee and thereafter remarries spouse/alternate payee - QDRO necessary?

[MEP]

Participant divorces his spouse/alternate payee in the 2000s and the divorce decree directs that a QDRO be drafted to split the participant's retirement account 50% between the participant and spouse/alternate payee for the period of the marriage.  QDRO is never received by the Fund.  Participant and spouse/alternate payee get re-married several years later and participant recently applied for pension benefits.  Does the Fund need to find out whether a QDRO was drafted?  Does the Fund need this QDRO before processing participant's application for benefits?  Any guidance appreciated.

[QDROphile]

Unless the plan (1) received a domestic relations order, or (2) shot itself in the foot will ill-advised provisions in its QDRO Procedures (possibly inspired by the ill-advised suggestions of the Department of Labor), the plan has no duty to inquire about anything in domestic relations proceedings, including compliance with terms of any decrees, orders, or judgments, including an order to prepare a domestic relations order that is intended to be a QDRO.

[MEP]

QDROphile - thanks for the response.  So, the Fund should just proceed with processing pension application for benefits like no QDRO existed?  Also, do you have anything I can use to support this?  Any guidance from DOL, caselaw, regulations, ect?

[fmsinc]

In my world if a Plan has actual notice of an existing QDRO, they will: (i) put a hold on the account, (ii) advise the Participant that they will not put him in pay status unless they receive a certified copy of the QDRO, or an Order vacating the Order, and, (iii) in some case file as intervenor in the case where the QDRO is issued.  Attorney for the Plan do not want to risk being required to make double payments.    

In Advisory Opinion No. 1999-13A , https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/advisory-opinions/1999-13a

the IRS Division of Fiduciary Interpretation Office of Regulations and Interpretations was asked:

 "You have asked for an advisory opinion as to whether, and if so when, a plan administrator may investigate or question a domestic relations order submitted for review to determine whether it is a valid “domestic relations order” under State law for purposes of section 206(d)(3)(B) of ERISA."  

The response was as follows:

"When a pension plan receives an order requiring that all or a part of the benefits payable with respect to a participant be paid to an alternate payee, the plan administrator must determine that the judgment, decree or order is a “domestic relations order” within the meaning of section 206(d)(3)(B)(ii) of ERISA — i.e., that it relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of the participant and that it is made pursuant to State domestic relations law by a State authority with jurisdiction over such matters. Additionally, the plan administrator must determine that the order is qualified under the requirements of section 206(d)(3) of ERISA. It is the view of the Department that the plan administrator is not required by section 206(d)(3) or any other provision of Title I to review the correctness of a determination by a competent State authority pursuant to State domestic relations law that the parties are entitled to a judgment of divorce. See Advisory Opinion 92-17A (Aug. 21, 1992). Nevertheless, a plan administrator who has received a document purporting to be a domestic relations order must carry out his or her responsibilities under section 206(d)(3) in a manner consistent with the general fiduciary duties in part 4 of title I of ERISA."

"For example, if the plan administrator has received evidence calling into question the validity of an order relating to marital property rights under State domestic relations law, the plan administrator is not free to ignore that information. Information indicating that an order was fraudulently obtained calls into question whether the order was issued pursuant to State domestic relations law, and therefore whether the order is a “domestic relations order” under section 206(d)(3)(C). When made aware of such evidence, the administrator must take reasonable steps to determine its credibility. If the administrator determines that the evidence is credible, the administrator must decide how best to resolve the question of the validity of the order without inappropriately spending plan assets or inappropriately involving the plan in the State domestic relations proceeding. The appropriate course of action will depend on the actual facts and circumstances of the particular case and may vary depending on the fiduciary’s exercise of discretion. However, in these circumstances, we note that appropriate action could include relaying the evidence of invalidity to the State court or agency that issued the order and informing the court or agency that its resolution of the matter may affect the administrator’s determination of whether the order is a QDRO under ERISA.5(5) The plan administrator’s ultimate treatment of the order could then be guided by the State court or agency’s response as to the validity of the order under State law. If, however, the administrator is unable to obtain a response from the court or agency within a reasonable time, the administrator may not independently determine that the order is not valid under State law and therefore is not a “domestic relations order” under section 206(d)(3)(C), but should rather proceed with the determination of whether the order is a QDRO." 

So there are times when the Plan Administration should get involved, and one of these must be if they have actual knowledge of the existence of a QDRO.  The PA has a fiduciary duty toward both the Participant and the Alternate Payee.  See  ALMA PARSONS v. BOARD OF TRUSTEES OF THE BOILERMAKER-BLACKSMITH NATIONAL PENSION TRUST, Civil Action No. 2:20-cv-00132,  United States District Court, S.D. West Virginia, Charleston Division (April 20, 2020) setting forth the fiduciary duty owed by the Plan as a fiduciary vis a vis the Alternate Payee. You can find this case at https://scholar.google.com/scholar_case?case=12166270204191846086&hl=en&lr=lang_en&as_sdt=20006&as_vis=1&oi=scholaralrt&hist=bY5nDLcAAAAJ:14880692104701005079:AAGBfm2qi1_JaXLJvydb4f3quYTnTlLkbA

Now go the the attached from DOL.  DOL re QDROs.pdf  Go to page 55, part of Appendix A and start reading at: "You have asked for an advisory opinion as to whether, and if so when, a plan administrator may investigate or question a domestic relations order submitted for review to determine whether it is a valid “domestic relations order” under State law for purposes of section 206(d)(3)(B) of ERISA."   

Lastly, many of the Plans with whom I deal have a form, an application, that a prospective retiree will submit in anticipation of retirement.  The form will specifically ask is there is a pending QDRO or a claim by a former spouse for benefits under the Plan.  You need to check for that.     

As Dirty Harry used to say, "Do you feel lucky?"  I don't know a Plan Administrator that wants to find himself in the middle of an expensive lawsuit in Federal Court.  Better to do nothing and let the parties and the state court resolve it.  

BTW, I have never seen a case where the remarriage of the parties, in and of itself, without more, resulted in a waiver of benefits from the prior divorce.  Do you want to be in the middle of that issue?  

David

[MEP]

fmsinc - thanks for your response.  I should reiterate that we are not aware that a QDRO exists - only that divorce decree states that a QDRO be drafted if it is needed to split the participant's retirement account 50% between the participant and spouse/alternate payee for the period of the marriage.  We found out about the divorce decree since it was requested as part of his application for benefits.  Our application process only asks for the decrees and property settlements, not whether a QDRO actually exists.  

Does that change your thought process?  Obviously, the goal is to get in front of any potential issues and avoid any possible legal exposure down the line.  One possible thing we have discussed internally is drafting a letter to the participant and spouse/alternate payee acknowledging the following: 1) that participant has a pension application currently in process; 2) that the Fund is in receipt of the divorce decree; 3) the provision in the decree regarding a QDRO; 4) confirmation that we did not receive a QDRO; and 5) confirmation of the parties' remarriage.  If a QDRO is not provided, we would process the application as if there was no divorce decree or DRO.  

[QDROphile]

Authority:

1.  The statute, both IRC and ERISA provisions speak only to what happens if a plan receives a domestic relations  order (not notice or whiff of an order).

2.  Schoonmaker v. Employee Sav. Plan (Amoco) 987 F.2d 410 (7th cir. 1992), which interprets the statute literally and narrowly and imposes liability on the fiduciary for restricting distribution based on less than receipt of a domestic relations order.

Note that the DOL either has never read the case or the statute or does not believe the words on the page and takes a position similar to that described by fmsinc. I think the DOL view of fiduciary responsibility in these matters is wrong as a matter of law and implementing the DOL position is problematic and not solved by the magic of "actual knowledge".  

[Nancy Keppelman]

In order to avoid paying 100% of the account to the participant and then getting hit with a QDRO, I advise treating the Divorce Judgment as if it were a QDRO.  The result is that both parties are advised that the judgment (as is usually the case) does not satisfy the requirements to be a QDRO.  The determination says, the participant's account will be available for distribution as of x date unless the parties submit a QDRO.  That allows both parties to submit a proper QDRO or they are on notice that the entire account will be distributed. This protects the plan and administrator without getting into the divorce case itself.

[fmsinc]

Attached is what you need to know about treating a Judgment of Divorce as a QDRO.  

Assuming you are an ERISA qualified Plan, you need to know that the source of the obligation to transfer pension or retirement benefits is NOT the QDRO, it is the Judgment of Divorce, or the Judgment of Divorce incorporating a Marital Settlement.  In my state of Maryland a QDRO is just an enforcement tool, like a garnishment or an attachment.  It is not part of the Judgment of Divorce.  So even in the absence a QDRO the obligation of the Participant to transfer benefits to the Alternate Payee still exists and is an enforceable obligation.

So at this point you have actual knowledge of the existence of an obligation that you are required to enforce: (i) if the Judgment of Divorce has all of the information set forth in my attached Memo; or, (ii) if you receive a QDRO.  I think at a minimum you would have an obligation to look at the Judgment of Divorce and to ask the Participant to produce it.  This exact thing happens on a regular basis when dealing with OPM with respect to FERS.  They have a form  SF-3107 (attached) that asks at Section C on the 5th page of the form.  And see "Section C" on the 2nd page - right column.      

I think your proposed letter is just fine.  If the intended Alternate Payee doesn't respond, and a QDRO is not forthcoming, then you need to make a determination of whether or not the Judgment of Divorce is a QDRO.  If so, act accordingly.  If not, notify the parties in the same way you would notify them if you determined that a proposed QDRO was not qualified.  I don't think the references in my first response would require you to do anything else.   If the Judgment of Divorce incorporates an Agreement, I think you need to review the Agreement and be determine whether that document contains the language necessary to render it as a "QDRO".

You might be able an Interpleader asking the court what you should do.

Good luck.   

David   

  

JAD = QDRO.pdf Appl for Immediate Annuity FERS SF3107.pdf

[QDROphile]

I agree that if the plan receives the divorce judgment or some other "paper" from the proceeding, the plan should treat it as the receipt of a domestic relations order and follow the process for determining qualification.  In fact, this is a good protective tactic by the would-be alternate payee to buy time necessary for the drafting of a would-be QDRO if that drafting and submission to the plan is delayed.

[Luke Bailey]

On 9/16/2021 at 4:13 PM, MEP said:

Does the Fund need to find out whether a QDRO was drafted?  Does the Fund need this QDRO before processing participant's application for benefits?

I would ask the participant and spouse. Why not?