Health benefits under divorce proceedings

[Guest meggie]

Does anyone know if there is a "work around" whereby a QDRO can be attached to post retirement medical? My understanding is that welfare/medical plans are not subject to QDRO- but something I read back in October,2000 (Nixon Peabody LLP) makes me think that the possibility exists that the pension and post retirement medical may be subject to marital property, if somehow the medical is referenced in the pension plan. (FYI-The participant has filed for a divorce after 32 years of marriage and his wife is currently covered under his post retirement medical plan and she is his contingent annuitant w/r to the pension benefit.) The publication said "The Department of Labor recently concluded that every benefit payable from a pension plan, even if it's not a pension benefit and even if the plan's terms don't permit its payment to an alternate payee, can be assigned to an alternate payee pursuant to a qualified domestic relations order . ERISA Op. 2000-09A, 2000ERISA LEXIS 9 (7/12/00)."

[KIP KRAUS]

Meggie

I’m going to take a stab at this from a practical viewpoint and past experience, but don’t have any site to quote to you.

As far as I’m concerned, a QDRO applies to pension benefits only. Most medical continuation programs for retirees that I have been involved in provide for the retiree medical coverage in the medical plan document and not the pension plan document. Having said that, even if the pension plan document did provide for retiree medical coverage in its document I would be surprised if it would allow for continuation of an ex-spouse’s medical coverage. Likewise, I would make the same assumption about the medical plan document regarding ex-spouses.

My other comment is that QDROs cannot require a plan to provide benefits that it would not otherwise provide absent a QDRO.

COBRA may be your only option, but check the plan documents.

[Larry M]

In at least one community property state - California - the value of the post retirement medical benefits is considered part of the community's assets. Therefore, the value is added to the value of other property (house, car, bank accounts, debts, etc.) to determine the total value of the community. Once that is determined, the properties are divided between the two parties.

[as an aside, in one situation, the judge would not accept a dollar value of the medical benefits (disparate values by the two expeerts). Instead he ruled, effectively, that when the retiree had a medical benefit in the future, the ex-spouse was to receive one-half the value of that benefit. hmmm, how does one give one-half a hernia operation?...]

[KIP KRAUS]

Very interesting LarryM. I would love to see how that judge made the determination on how the spouse got ½ of the retiree’s medical benefits. I would still argue that the judge over stepped his bounds by including a benefit that the employer may not ordinarily provide to a non-dependent. It seems to me that an ERISA plan participation requirements would preempt a state ruling, but then I’m not an attorney and not surprised at anything the courts presume to take action on in the name of justice.

Maybe the judge, being a group insurance expert as well as a judge, knows some way to force an insurer, or self-insured medical plan to allow non-dependents to participate in an employer’s medical plan.

I could be wrong about all of my arguments, but then I try to use logic, not precedent when making my arguments.

[Larry M]

Kip, notice I said "effectively".

The judge did not rule the plan had to pay the ex-spouse. What he did do was to refuse to place a current value on the benefit. If he had done so, the value would have been added to the other community interests and the total property would have been divided equitably....well, at least divided.

Instead, the judge required the participant (not the plan) to pay to the ex-spouse an amount equal to a portion of the value of any services received by the participant at the time they were received by the participant.

It was a very logical decision IF you (1)accept the fact that the retiree medical plan is recognized as having a value and is part of the community interest, (2) you do not wish to place a number on that value as of today, and (3) realize the ex-spouse is entitled to something of value as part of the community. Of course, using that logic led to an irrational decision.