Does the specific state law/statute need to be identified?

[Wacko in Winnebago]

A proposed QDRO I just received states, "This Order *** is made pursuant to the domestic relations laws of the State of [redacted]."

Does this phrasing satisfy the requirement of § 1056(d)(3)(B)(ii)(II) that the domestic relations order "is made pursuant to a State domestic relations law" or does the specific state law/statute need to be identified in the order in order to be qualified by the Plan Administrator?

[QDROphile]

Satisfies. The statement itself is not even necessary in the order, but it is a nice touch.

[Peter Gulia]

Since the mid-1980s, many people (including many with no lawyer) have proposed such a sentence in the text of the court’s order. Why? It might help support a plan administrator’s finding that an order “is made pursuant to a State domestic relations law[.]” It might help meet an element on a QDRO administrator’s checklist. (An absence of such a sentence might result in a kick-out to read the order and, in some circumstances, consider context information or relevant law to discern whether the order was made under domestic-relations law.)

The sentence is especially helpful if the issuing court’s jurisdiction is not restricted to domestic-relations matters and the order’s text does not mention (as it often might not) the claim that was grounds for the court’s order.

Some plans’ administrators might accept without question a judge’s finding that the order was made under domestic-relations law, unless the administrator knows the finding is obviously wrong.

[Wacko in Winnebago]

Thanks for the responses. I'm inclined to believe that it was included to satisfy, as Mr. Gulia suggested, the plan's checklist for qualification. The first item of the plan's Evaluation Guidelines states: 

"1. Is the order a domestic relations order?

Comments. A domestic relations order may take the form of a judgment, decree, or court order (including a court approval of a property settlement agreement) made pursuant to a state domestic relations law (including community property law). It must relate to the provision of child support, alimony, or marital property rights to a spouse (present or former), child, or other dependent of the plan participant. The order must specify the state domestic relations law which permits the division of retirement benefits between the parties."

 

[fmsinc]

In Advisory Opinion No. 1999-13A , the DOL, EBSA Division of Fiduciary Interpretation Office of Regulations and Interpretations.  The full Opinion can be found at https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/advisory-opinions/1999-13a.  The first line of the Opinion states

"This is in response to your request on behalf of the UAL Corporation (UAL) and United Air Lines, Inc. (United) for an advisory opinion. Specifically, you ask how a plan administrator should treat domestic relations orders the plan administrator has reason to believe are "sham" or "questionable" in nature.

Later in the Opinion it says:

        "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." 

I concerns me that not all jurisdictions that have laws relating to QDROs are "States", e.g. the Virgin Islands, Puerto Rico, Guam, the Northern Marianas, American Samoa.  Perhaps there is a regulation out there saying that "state" includes "territories"

A wrinkle on this issue is the case of Brown v. Continental Airlines, Inc., 647 F. 3d 221 (5th Cir., 2011) -
https://scholar.google.com/scholar_case?case=4019345202025914766&q=brown+v.+continental+airlines&hl=en&as_sdt=20000003

Continental alleged that a number of pilots and their spouses obtained "sham" divorces for the purpose of obtaining lump sum pension distributions from the Continental Pilots Retirement Plan that they otherwise could not have received without the pilots' separating from their employment with Continental. The pilots were allegedly acting out of concern about the financial stability of Continental and the fear that the Plan might be turned over to the PBGC and that their retirement benefits would be substantially reduced (exactly what did happen). 

    By getting divorced, the pilots were able to obtain QDROs from state courts that assigned 100% (or, in one instance, 90%) of the pilots' pension benefits to their respective former spouses.  The Plan provides that, upon divorce, if the pilot is at least 50 years old (as all the pilots in this case were), a former spouse to whom pension benefits are assigned can elect to receive those benefits even though the pilot continues to work at Continental.  (Think “separate interest” annuity allocation.)  The former spouses presented the QDROs to Continental and requested payment of lump-sum pension benefits.  After the former spouses received the benefits, the couples remarried.  

    Continental sought to obtain restitution under ERISA Section 502(a)(3).  The Court of Appeals noted that ERISA § 206(d)(3) limits the QDRO qualification determination to whether the state court decree calls for benefit payments outside the terms of the Plan. It rejected Continental’s expanded reading of §206, concluding that plan administrators may not question the good faith intent of Participants submitting QDROs for qualification. 

 But note that DoL EBSA Advisory Opinion 13A mentioned above, dealing with "sham" divorces, was not cited in Continental.  The reason I suspect is because there is nothing in the law of most states that prevents the parties from obtaining a divorce if they have the grounds for divorce set forth in the applicable state Code, even though there may be an ulterior motive that may involve, for example, estate or tax planning, or, as in Continental, dealing with pension benefits that may be negatively impacted by the impending Bankruptcy of the Plan Sponsor.  The reciprocal is also true.  Many people remain married for a period of time in order to, for example, give the non-Military party the time necessary to obtain access to lifetime Military based health insurance under the 20/20/20 rule, or give the non-employee's spouse who is in the US pursuant to the employee's spouse's G-4 visa time to obtain a green card (especially important if they have children).

I have been preparing QDROs since 1986, I have never failed to insert the name of the applicable state, and in most cases the actual statutory reference.  Another thought occurs to me.  In more than a few cases the parties may divorce in one state and one or both may move to another state.  A certified copy of the divorce decree will be enrolled in the general jurisdiction court in the new state and the QDRO will issue from that state, but under the law of the state where the divorce was granted. 

Sometimes you are moving from a "marital property" state to a "community property" state where the law is different.   

The laws with respect to the allocation of pension and retirement benefits can vary from state to state.  Under the law of some states if you fail to mention survivor annuity benefits in the Agreement or the court doesn't mention them in the divorce decree, the alternate payee with not receive them.  Some states hold that a general agreement or court order to transfer "retirement benefits" includes both retirement and survivor annuity benefits.  Some states hold that all disability retirement benefit (except Military) are marital property and can be divided between the parties.  Other states hold that disability benefits are not marital property.  Some states recognize common law marriages and others do not.  In some states the court only has jurisdiction to enter a QDRO at the time of an annulment or absolute divorce (or thereafter).  In other states a QDRO can be entered before the annulment or divorce decree is entered. 

David    

 

[Peter Gulia]

fmsinc, ERISA (the statute itself, not a rule or regulation), in its definitions section includes this:

The term “State” includes any State of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, American Samoa, Guam, Wake Island, and the Canal Zone.  . . . .

ERISA § 3(10).

[Wacko in Winnebago]

fmsinc, Thanks for your detailed and thorough response. You actually touched upon my unasked question regarding how much investigation a plan administrator might/should/is allowed to perform into the validity of a suspected "sham" or fraudulent QDRO. It seems that the general consensus is somewhere between not much and none, by design. Even the Advisory Opinion you provided tempers its assertion that a plan administrator is not free to ignore evidence calling the order's validity into question by suggesting that the plan defer to the State court or agency that issued the order for guidance.

 

 

[Nate S]

11 hours ago, Wacko in Winnebago said:

fmsinc, Thanks for your detailed and thorough response. You actually touched upon my unasked question regarding how much investigation a plan administrator might/should/is allowed to perform into the validity of a suspected "sham" or fraudulent QDRO. It seems that the general consensus is somewhere between not much and none, by design. Even the Advisory Opinion you provided tempers its assertion that a plan administrator is not free to ignore evidence calling the order's validity into question by suggesting that the plan defer to the State court or agency that issued the order for guidance.

 

 

The only validity question I've ever asked was regarding the electronic signature the courts began attaching in 2020 instead of a wet judge's signature and clerk's stamp/embossment.

But the State cite I consider to be imperative to the QDRO itself, especially if the state law has been further modified by court decision.  A NY QDRO for a pension plan has to reference Majauskas; a PA QDRO for a defined contribution plan may be interpreted either of two ways with or without Smith.  And as fmsinc notes, many parties live in or move to a different state from their partner, or employer, and those attorney's may have zero inkling as to what legal requirements the out-of-state employer is beholden to.

[Luke Bailey]

On 4/12/2022 at 10:46 AM, Wacko in Winnebago said:

fmsinc, Thanks for your detailed and thorough response. You actually touched upon my unasked question regarding how much investigation a plan administrator might/should/is allowed to perform into the validity of a suspected "sham" or fraudulent QDRO. It seems that the general consensus is somewhere between not much and none, by design. Even the Advisory Opinion you provided tempers its assertion that a plan administrator is not free to ignore evidence calling the order's validity into question by suggesting that the plan defer to the State court or agency that issued the order for guidance.

 

 

Wacko, I think the idea is to rely in great part on the reasonable presumption that since the plan will inform the participant regarding its initial determination that the DRO is qualified, the participant will pipe up if there is a problem. In a situation where the participant is nonresponsive, the plan would probably want to take greater care than usual.