jmader

There are a number of legal hurdles to permit participation. In the case of a multiemployer health plan it is not as clear or as easy as in the case of a pension plan. First, union membership may have little do do with this. The issue that will be most important is whether the plan is a VEBA under Code 501(c)(9) or is exempt under Code 501(c)(5). If the plan is exempt under 501(c)(9) and depending on the other employees covered, the inclusion of this category may violate the "employment related common bond" requirement under that section of the Code. I had heard that a few years ago the Service was taking the position that a VEBA violated this section if it covered employees under CBAs and both employees of the trust and employees of the union. You also need to look at the regulations Code 419A(f)(5) which provides an exemption from the Code asset account limits for collectively bargained plans. The definition of collectively bargained plan is a temporary regulation and its revision has been on the IRS priority guidance plan for several years but no actual proposal has been made. And, significantly for your question, the regulation states that-- (4) Notwithstanding the preceding paragraphs and pending the issuance of regulations setting account limits for collectively bargained welfare benefit funds, a welfare benefit fund will not be treated as a collectively bargained welfare benefit fund for purposes of Q&A-1 if and when, after July 1, 1985, the number of employees who are not covered by a collective bargaining agreement and are eligible to receive benefits under the fund increases by reason of an amendment, merger, or other action of the employer or the fund. In addition, pending the issuance of such regulations, for purposes of applying the 50 percent test of paragraph (2) to a welfare benefit fund that is not in existence on July 1, 1985, “90 percent” shall be substituted for “50 percent”. So adding this category of non-collectively bargained employees to the plan could result in loss of the plan's exempt status or the loss of employer deductions for contributions because most multiemployer health plans exceed the Code 419A asset account limits. It probably won't because the Service doesn't pay that much attention to health plans and it is overwhelmed but it is something you should factor in. Also, you cannot ethically advise your client under IRS ethics rules based on the likelihood that they will or will not be caught. You could request a PLR but recent PLRs on this have generally been denied. I do wish IRS would issue the new reg because they have signaled that the approach may be different but in the current environment who knows when that will be. I have been watching this for years.

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/

This issue was addressed in DOL Advisory Opinion 92-17A which concluded that an annulled marriage may be the basis for an award under a QDRO if provided by state law. With respect to your submission, you have represented that the Order assigns to former spouse Y, as “alternate payee,” 50% of participant X's accrued benefit under the Plan, and designates Y as the “surviving spouse” of X. Further, you indicate that Michigan domestic relations law provides for such a division of property upon the annulment of a marriage. Accordingly, it is the view of the Department that, to the extent the Order was executed by a court of competent jurisdiction pursuant to Michigan domestic relations law, neither the determination under the Order that Y is a “former spouse,” and thus meets the requirements to be an “alternate payee” for purposes of section 206(d)(3)(B) of ERISA, nor the determination that Y is a “surviving spouse” for purposes of section 206(d)(3)(F) of ERISA, are required to be reviewed by the plan administrator.

I think the plan's position is incorrect and the judge made the decision to try to correct the situation. The DOL QDRO regs clearly provide for posthumous QDROs. So if an order is issued it could still be a QDRO and then the Alternate Payee and the Plan might litigate over the plan's interpretation that there was no benefit to which the order could be applied. This could be problematic because there is language in the statute itself that points to benefits after the death of the participant and before the participant's retirement. ERISA 206(d)(3)(E)(i) provides "A domestic relations order shall not be treated as failing to meet the requirements of clause (i) of subparagraph (D) solely because such order requires that payment of benefits be made to an alternate payee -- (I) in the case of any payment before a participant has separated from service, on or after the date on which the participant attains (or would have attained) the earliest retirement age," The "or would have attained" language very clearly contemplates payment of benefits to the alternate payee of a participant who died before his/her retirement and before the AP. In my experience of many years with DB plans, these plans do provide a benefit to APs in the circumstances discussed at least since the issuance of the 2010 Final DOL regulations. So my reaction is that the judge was reacting to the narrow interpretation of the plan that deprived the AP of a benefit and responded to correct that problem. Perhaps not an elegant fix but certainly a just one in my view.