QDRO after AP Dies?

[HCE]

We have been asked if we can process a QDRO provided to us after the death of the AP.  Our QDRO procedure does not address this scenario.  Can we?

[C. B. Zeller]

Who is "us" in this scenario? Plan administrator? TPA? Recordkeeper?

Was the DRO accepted as qualified before the death of the alternate payee?

Does the DRO itself address what happens if the alternate payee dies before the distribution date?

[HCE]

Sorry, "us" is the group delegated by the administrator to approve of (determine "qualification" status) of DROs.

We have no received a DRO on this account so far -- they asked if we can approve of one received after the death of the AP.

Since we have not received a DRO, I can't answer the last question.  If we were to receive one, I would require it to address how to handle the death of the AP.

[QDROphile]

Is the plan a DC plan? Are both parties, including the deceased AP by representation, requesting the assignment?  Is the deceased AP a former spouse? If you are confident that no one involved will be contesting the assignment, you are pretty safe even if the definition, "a domestic relations order— (i) which creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan" does not include "estate of the alternate payee" within the meaning of IRC section 414(p).  I have not tested this proposition by research and have no experience with the question. I have heard that death of one of the parties to a divorce proceeding creates issues under state law, but the plan does not have to worry about state law -- almost always the plan can rely on the order.  If someone is contesting, then you need to dig deeper, but there are shortcuts to make someone else do the heavy lifting on the research.

[HCE]

The Plan is a DC Plan.

[fmsinc]

The answer is "yes" if your plan is subject to ERISA:  Although it used to be otherwise, the Pension Protection Act of 2006 changed the landscape dramatically.  

“29 CFR 2530.206 - Time and order of issuance of domestic relations orders

        (a) Scope. This section implements section 1001 of the Pension Protection Act of 2006 by clarifying certain timing issues with respect to domestic relations orders and qualified domestic relations orders under the Employee Retirement Income Security Act of 1974, as amended (ERISA), 29 U.S.C. 1001 et seq.
        * * * * *
        (c) Timing. 
            (1) Subject to paragraph (d)(1) of this section, a domestic relations order shall not fail to be treated as a qualified domestic relations order solely because of the time at which it is issued.
            (2) The rule described in paragraph (c)(1) of this section is illustrated by the following examples:

                Example 1. Orders issued after death. Participant and Spouse divorce, and the administrator of Participant's plan receives a domestic relations order, but the administrator finds the order deficient and determines that it is not a QDRO. Shortly thereafter, Participant dies while actively employed. A second domestic relations order correcting the defects in the first order is subsequently submitted to the plan. The second order does not fail to be treated as a QDRO solely because it is issued after the death of the Participant."  (Emphasis supplied.)

    See Thomas v. Sutherland at
https://scholar.google.com/scholar_case?case=1601430218420084129&hl=en&as_sdt=6&as_vis=1&oi=scholarr where the U.S. District Court in Utah held:

        "Although there is no case law precisely on point, the supporting material suggests that this is the appropriate result.  The Code of Federal Regulations provides that a DRO does not fail to be treated as a QDRO solely because of the time at which it is issued. 29 C.F.R. 2530.206(c)(1). This includes orders issued after the participant's death, and occasions where a divorced spouse no longer meets the technical definition of a "surviving spouse" under the terms of the plan. 29 C.F.R. 2530.206(c)(1)(ex. 1 & 2). In addition, the Eighth Circuit has found that a domestic relations order can be qualified posthumously if notice is given and the order is filed during the eighteen-month period permitted under ERISA to secure a QDRO. Hogan v. Raytheon, 302 F.3d 854, 857 (8th Cir. 2002). Although different than the case at hand, the trend has been to enforce the terms of an otherwise valid QDRO as it was intended to be enforced, so long as notice was given and the order was filed during the period permitted under ERISA."  (Emphasis supplied.)

    See also, Yale-New Haven Hospital v. Nicholls, 788 F.3d 79, 85 (2d Cir. 2015) where the Court held that two nunc pro tunc Orders issued after the death of the Participant were valid QDROs.  Said the Court: 

        “Domestic relations orders entered after the death of the plan participant can be QDROs. In the Pension Protection Act of 2006, Congress made clear that a QDRO will not fail solely because of the time at which it is issued, see Pub. L. No. 109-280, § 1001, 120 Stat. 780 (2006), although several of our sister circuits had already reached that conclusion, see, e.g., Files v. Exxon Mobil Pension Plan, 428 F.3d 478, 490-91 (3d Cir. 2005) (finding that a posthumous order constituted a QDRO), cert. denied, 547 U.S. 1160 (2006); Patton v. Denver Post Corp., 326 F.3d 1148, 1153-54 (10th Cir. 2003) (same); Hogan v. Raytheon Co., 302 F.3d 854, 857 (8th Cir. 2002) (same); Trs. of Dirs. Guild of Am.-Producer Pension Benefits Plans v. Tise, 234 F.3d 415, 421-23 (9th Cir. 2000) (same).”  (Emphasis supplied.)

Note that OPM will not honor a FERS or CSRS Court Order Acceptable for Processing entered after the death of the Employee.  The same is true with respect to Military Retired Pay Division Orders and Foreign Service Pension System Orders. State, County and Municipal Plans and other Plans not subject to ERISA may or may not honor post mortem or posthumous Retirement Benefits Orders, but many do, some using a nunc pro tunc approach. See the following cases: 

Patton v. Denver Post Corp., 326 F.3d 1148 (10th Cir.2003) 

Robinette v. Hunsecker, 212 Md.App. 76, 66 A.3d 1093, 293 Ed. Law Rep. 892, (2013)

Griffin v. Griffin, 62 Va. App. 736, 753 S.E.2d 574 (2014) 

Rivera v. Lew, District of Columbia Court of Appeals, On Certification from the United States Court of Appeals for the District of Columbia Circuit, Case No. 14-SP-117, 99 A.3d 269 (2014)

Patterson v. Chrysler Group, LLC,  845 F.3d 756 (USCA 6th Cir. 2017)

Garcia-Tatupu v. NFL Player Retirement Plan, Civil Action No. 16-11131-DPW, United States District Court, D. Massachusetts (2017) that you can find at:
https://scholar.google.com/scholar_case?case=13784574282734726035&hl=en&lr=lang_en&as_sdt=20006&as_vis=1&oi=scholaralrt.

Files v. ExxonMobil Pension Plan, 428 F. 3d 478 (Court of Appeals, 3rd Circuit 2005)

David S. Goldberg 

[Peter Gulia]

HCE, returning to your query: “We have been asked if we can process a QDRO provided to us after the death of the [alternate payee].”

If a court order that might be a domestic-relations order is submitted to an ERISA-governed retirement plan’s administrator, that the order is submitted after a proposed alternate payee’s death might not, by itself, excuse the administrator from responsibility to decide whether the order is a DRO and, if so, a QDRO.

The more challenging questions are:

If an order specifies payments to an alternate payee who is no longer alive, is the order a QDRO?

If an order specifies payments to an alternate payee’s named beneficiary or other successor-in-interest, is the order a QDRO?

If a DRO may specify a successor-in-interest for an alternate payee’s portion, must the successor be someone who qualifies as the participant’s spouse, former spouse, child, or other dependent?

If the administrator finds that the order’s payee otherwise could be a proper alternate payee, does the order specify the name and mailing address of that alternate payee?

If the administrator finds that the order’s payee could be a proper alternate payee, might the order otherwise fail to qualify because it calls for “[a] type or form of benefit, or [an] option, not otherwise provided under the plan”?

Beyond carefully reading the plan and the statute, an administrator might want its lawyer’s advice.

Further, whether the administrator’s decision is thumbs-up or thumbs-down, an administrator might explain in a careful writing, whether immediately furnished to claimants or not, a thorough reasoning for the decision. Such a writing might improve the administrator’s defenses on a challenge. (A challenge might come from the participant or a would-be alternate payee, whichever is disappointed or frustrated by the administrator’s decision).