DRO with no divorce

[BG5150]

I got a DRO today for a participant in Louisiana.  The DRO says there is no divorce and that in LA, a community property state, the DRO can be a mechanism by which a participant can "donate" to the spouse "of his undivided interest in a thing forming part of the community."

Anybody ever come across anything like that?  Everything else in the Order lines up nicely to form a QDRO.

[Lois Baker]

Related thread?

 

[Peter Gulia]

ERISA § 206(d)(3)(B)(ii)(II) recognizes that community-property law might, in some contexts, also be domestic-relations law.

But that does not negate § 206(d)(3)(B)(ii)(I)’s condition that a domestic-relations order must “relate[] to the provision of . . . alimony payments, or marital property rights to a spouse, former spouse . . . of a participant[.]”

The QDRO-deciding administrator should read carefully the exact text, and the whole text, of the court’s order.

Also, which court and division of the court issued the order might be a relevant aid to help consider whether the order is a domestic-relations order.

[QDROphile]

And in Louisiana, they have the Napoleonic Code, Stella.

[BG5150]

Coincidentally, one of the attorneys who pioneered the "In Marriage QDRO" is representing the participant in this.

[CuseFan]

Yeah, we had all sorts of discussion on this a week or two ago. So whoever asked "is this going to be a thing now" - I think you have your answer.

[Dare Johnson]

I would look at DOL Advisory Opinion 90-46A.  

Here are a couple of quotes from AO:

"We find no indication Congress contemplated that the QDRO provisions would serve as a mechanism in which a non-participant spouse's interest derived only from state property law could be enforced against a pension plan."

and

"Accordingly, it is the opinion of the Department of Labor that the Court Order is unenforceable against the Plan."

[fmsinc]

I hate to point out that BG5150 did not bother to say it is an ERISA qualified plan, but your answers assume that it is so I will go with that.  

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

And Peter Gulia cites § 206(d)(3)(B)(ii)(I)’s that provides: 

"(ii)the term “domestic relations order” means any judgment, decree, or order (including approval of a property settlement agreement) which—
(I)relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and
(II)is made pursuant to a State domestic relations law (including a community property law)."

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Note that I cannot find DoL Advisory Opinion 90-46A anywhere online. If anybody has a copy please post it to this blog.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>  

See the attached FAQ page from the DoL where at the bottom of the 2nd page is says -

"Must a domestic relations order be issued as part of a divorce proceeding to be a QDRO?

 "A domestic relations order that provides for child support or recognizes marital property rights may be a QDRO, without regard to the existence of a divorce proceeding. Such an order, however, must be issued pursuant to state domestic relations law and create or recognize the rights of an individual who is an alternate payee (spouse, former spouse, child, or other dependent of a participant).

 * * * *

"Reference: ERISA § 206(d)(3)(B); IRC § 414(p)(1); Advisory Opinion 90-46A; see Egelhoff v. Egelhoff, 121 S. Ct. 1322, 149 L. Ed. 2d 264 (2001); see Boggs v. Boggs, No. 97-79 (S. Ct. June 2, 1997)"

So if the law of Louisiana provides for a transfer to a spouse not in connection with a divorce proceeding, that would be valid.  But to CYA I would get an opinion of counsel confirming that to be the case. 

David 

 

USDeptLabor4pageQdroFAQs.pdf

[Peter Gulia]

ERISA Advisory Opinion 90-46A, https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/advisory-opinions/1990-46a.pdf. It concludes:

“[I]t is the view of the Department of Labor that Congress intended the QDRO provisions to encompass state community property laws only insofar as such laws would ordinarily be recognized by courts in determining alimony, property settlement and similar orders issued in domestic relations proceedings. We find no indication Congress contemplated that the QDRO provisions would serve as a mechanism in which a non-participant spouse’s interest derived only from state property law could be enforced against a pension plan.”

But others might construe or interpret the statute differently.

[Luke Bailey]

Interesting. I think Peter's and the others' cautions above should be carefully considered, BG5150. You might also want to Google the Ablamis v. Roper case out of 9th Cir. Of course, assuming you are the plan's TPA and not the company's or plan's legal counsel, your role would seemingly be to advise the plan administrator, which in this case may be that it should seek legal advice.

[BG5150]

We are the 3(16) plan administrator, and are tasked with approving/denying DROs as QDROs.  Our legal department does them.

Does the fact that the Advisory Opinion was issued in 1990, but the DOL webpage that shows today was obviously created much later mean anything?  Has the stance changed?

[Peter Gulia]

I am unaware of any later ERISA Advisory Opinion that undoes the reasoning of Opinion 90-46A (Dec. 4, 1990).

An agency’s document that is not a rule or regulation (and usually is made with less process than a notice-and-comment rulemaking) is an interpretation a court need not defer to; instead, it gets only “respect” and only if the interpretation is persuasive. For example, Christensen v. Harris County, 529 U.S. 576 (May 1, 2000) (rejecting an argument that the Court should give Chevron deference to a Labor department opinion letter); Bussian v. RJR Nabisco Inc., 223 F.3d 286, 25 Empl. Benefits Cas. (BL) 1120, 1127-1128 (5th Cir. Aug. 14, 2000) (rejecting the Secretary of Labor’s argument that the court should give Chevron deference to a Labor department interpretive bulletin).

For an example of a case in which a State court denied a DRO, your lawyers might read Jago v. Jago, 2019 Pa. Super. 246 (Pa. Super. Ct. 2019) https://casetext.com/case/jago-v-jago?sort=relevance&resultsNav=false&q=. The petition did not ask for a divorce, or for any relief other than entry of an order to be directed to a retirement plan. The court “h[e]ld that absent a divorce or other domestic relations matter pending between spouses, they cannot obtain a QDRO for the sole purpose of moving funds in the participant/spouse's ERISA plan out of the plan to the non-participating spouse.” The opinion reflects the court’s reasoning because only one attorney appeared, and he presented the argument for allowing the domestic-relations order.

I am unaware of any similar case involving spouses under a community-property regime.

Beyond the merits of whether the court’s order is or isn’t a DRO, your lawyers also might consider whether the plan’s governing documents provide deference to an administrator’s decision about whether a court’s order is a QDRO or even a DRO. And your lawyers might evaluate the extent to which a court should or would defer to the administrator’s plausible interpretations of the plan’s governing documents (including interpretations of ERISA sections 3, 205, 206, 404, and 514) and discretionary findings.

[fmsinc]

It is no wonder that I was not able to find DoL Advisory Opinion 90-46A online.  It is bizarre for a number of reasons.  First, the QDRO was issued by a Probate Court after the death of the Alternate Payee at a time when she was no longer a "spouse" or a "former spouse" of the Participant.   Although we could have a metaphysical argument about whether she was a former spouse, she was in fact a dead spouse.  And the QDRO directed the payment of retirement assets to the estate of the Alternate Payee.  (What would have happened if the QDRO had directed payment directly to the Alternate Payee?  Would the payment have wound up in her estate?) 

I am put in mind of Al Jolson who used to say, "You ain't seen nothin' yet." 

The author of the Advisory Opinion says, "In the case at hand, the Court Order was issued in a probate proceeding and would recognize an interest in pension benefits of the surviving spouse solely on the basis of the state community property law."  So?  

29 USC 1056(d)(B )(3)(ii) [ERISA § 206(d)(3)(B)(ii)] provides: 

"(ii)the term “domestic relations order” means any judgment, decree, or order (including approval of a property settlement agreement) which—
(I)relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and
(II)is made pursuant to a State domestic relations law (including a community property law)."  (Emphasis supplied.)

Perhaps "community property laws" were not part of the law in 1992.  

And as much as some of you guys want to trash DoL publications as not having the force and effect of law, the DoL publication "QDROs - The Division of Retirement Benefits Through Qualified Domestic Relations Orders" is unequivocal: 

"Q 1-8:    Must a domestic relations order be issued as part of a divorce proceeding to be a QDRO?

"No.  A domestic relations order that provides for child support or recognizes marital property rights may be a QDRO, without regard to the existence of a divorce proceeding. Such an order, however, must be issued pursuant to state domestic relations law and create or recognize the rights of an individual who is an "alternate payee" (spouse, former spouse, child, or other dependent of a participant).

"An order issued in a probate proceeding begun after the death of the participant that purports to recognize an interest with respect to retirement benefits arising solely under state community property law, but that doesn't relate to the dissolution of a marriage or recognition of support obligations, is not a QDRO because the proceeding does not relate to a legal separation, marital dissolution, or family support obligation."  (Emphasis supplied.)  Note that this case preserves the holding under the facts set forth in AO 90-46A and cites ERISA 260(d)(3)(B).

"[ERISA § 206(d)(3)(B); IRC § 414(p)(1); Advisory Opinion 90-46A (Appendix A); see  Egelhoff v.  Egelhoff, 121 S.Ct. 1322, 149L. Ed. 2d 264 (2001); see  Boggs v.  Boggs, 520 U.S.  833, 117 S.Ct.  1754 (1997)]"

While Jago v. Jago, 2019 PA Super 246, 217 A.3d. 289 (2019) is totally at odds with the foregoing, Mr. and Ms. Jago could have followed the lead of Brown v. Continental Airlines, 647 F.3d 221 (5th Cir. 2011), that is, filed for divorce, had the QDRO executed by the Court, qualified by the Plan Administrator, the money transferred to the wife's IRA, and then remarried. 

It is in the very nature of Legislatures and Judges to have no idea of the one enduring reality of life in the family law arena - that people have the ability to be very creative when it comes to accomplishing what the people who draft the law are trying to prevent. 

Even outside of family law, in the early days of my practice the law in DC required the payment of a transfer taxes when real estate was transferred one party to another.  But the same tax was not imposed if a party transferred the property to a corporation that he owned, or to himself from a corporation that he owned.  So what happened, the owner of the property would simply transfer the real estate corporation that he solely owned.  He would then sell the shares of the corporation to the intended buyer of the property tax free.  The new owner of the stock would transfer the property from the corporation to himself tax free.  This was embarrassingly simple.  The legislature never thought of that. 

David

[QDROphile]

I don’t trash the DOL because the publications don’t have the force of law, I trash the DOL because the DOL is wrong about the law.  I also trash the DOL because it did not give us any useful law or guidance on post-death QDROs when Congress instructed it to do so.