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QDRO not prepared before participant died


Guest JD698

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A couple divorced in 1/03. Pursuant to the property settlement agreement a QDRO was to be prepared. The wife was to receive 1/2 of the husband's pension. The husband died in 9/03 and a QDRO was never prepared. The husband never changed his beneficiary card with the pension plan before his death and after his divorce which would entitle the wife as beneficiary to get the entire pension.

1. Does the wife now get the entire pension?

2. Can the QDRO be prepared and entered after the husband's death?

There is also a minimal life insurance policy which was not referred to in the property settlement agreement. The only mention of life insurance was a statement saying that the husband had to maintain at least 250K in life insurance with his 3 kids as equal beneficiaries. The plan at issue here is 5K.

3. Does the wife get the 5K also or does it still go to the children?

Thanks in advance.

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Does the plan document allow for non-spouse beneficiaries of the DB plan?

I would think that if the small life insurance policy was not addressed in the property settlement, than whomever his designated beneficiary was at the time of his death would receive it.

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1 and 2.

Start with whether you anticpate a domestic relations order or not. If you anticipate a domestic relations order, you have two initial quesions. Assuming that some other divorce papar is not a QDRO, will the state court issue a domestic relations order that can qualify? If not, go no further in this line of thinking. If the state court will issue an order, can that order qualify? An interesting question with different opinions. I think one or more threads have addressed the point, and I personally think the answer is that a post death domestic relations order can qualify if the property settlement was approved by or incorporated into a pre-death domestic relations order and had enough content to suppot the post-death order (but state law still might not permit a post-death order) . If the order can qualify, what does the order say to do? That provides your answers on the retirement plan.

Assuming no QDRO at any time, if the former spouse does not get the entire pension, who would? Does the plan have terms that apply to the effect of divorce on beneficiary designations? If not, it looks like you have an undisturbed designation of the former spouse as beneficiary, and the beneficiary should be paid.

3. Go to cases in Texas (where else other than California)? to get really confused about wht the law is. The correct answer should be that the designated beneficiary gets the life insurance benefits. I don't believe in QDROs for welfare benefits, but wiser judges have disagreed. Go to those decisions for even more confusion and a shortcut back to the post-death QDRO issues.

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If the participant is not married at death then the death benefits are those paid to a non spouse beneficiary under the plan which is usually nothing in a DB plan. The larger issue is whether the state court retains jurisdiction over the property settlement after the divorce and could issue a DRO to the plan providing the ex spouse with the 50% survivor benefit. There is case law permitting post mortem QDROs under the terms agreed to in the divorce. As a matter of equity the ex spouse should not be denied the right to the benefits agreed to in the property settlement because of the death of the employee if such benefits were vested at the employee's death and would have been payable under the plan.

If the LI policy is not employer provided then the benefits will be paid to the designated beneficiary. However, some states (CA, WA and HI) have statutes which automatically remove the spouse as beneficary upon divorce. Need to check state law.

mjb

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The wife was to receive 1/2 of the husband's pension.

...

1. Does the wife now get the entire pension?

Not stated is what type of plan. If this is a DB plan, check the plan document (always good advice anyway). It is possible that the only death benefit to a surviving spouse (if a valid QDRO) is a 50% survivor annuity. Many other possibilites

If this is a DC plan, it is possible that the plan awards 50% of account balance to spouse, and the other 50% to another "beneficiary".

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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I agree that if the plan pays death benefits only to spouses, the former spouse as undisturbed designated beneficiary would get nothing because of plan terms. A QDRO, if the former spouse can get one, could put the former spouse into the position of a surviving spouse for puposes of the death benefit.

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  • 1 month later...

Some new information to add to this posting:

This is a money purchase pension plan (DC). The property settlement agreement does not mention this plan at all. It sets forth the valuation of the pension with the employer for purposes of equitable distribution but nowhere does it mention the union's plan.

Does this provide an easier solution to this situation?

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