Holder of QDRO remarries ex-spouse participant. Result ?

[Guest halka]

Part 1: Participant divorces, ex-spouse receives QDRO but leaves amount in the Plan. Participant and spouse remarry while participant is still active and not eligible for distribution. What, if any, impact on the QDRO?

Part 2: If the Participant in #1 was an executive of Plan/Sponsor and possibly subject to claims of fiduciary liability, should/could the plan trustee freeze the plan assets currently subject to that QDRO?

Toss-up: Is there a duty on the trustee to investigate the "purpose/validity" of the divorce which resulted in the QDRO?

Thanks for any opinions.

[PensionNewbee]

would it not be logical to assume that because the divorce has been invalidated, the QDRO suffers the same fate?

[david rigby]

Logic? Law? You decide.

But here is another discussion: http://benefitslink.com/boards/index.php?showtopic=18822

[Kirk Maldonado]

PensionNewbee:

Why do you think the subsequent remarriage "invalidates" the prior divorce?

What if the person had married spouse 2 after the divorce from spouse 1, and then divorced spouse 2 and later remarried spouse 1 again? Are you saying that because the divorce from spouse 1 was invalidated, then the person could be charged with bigamy for having married spouse 2?

By the way, this isn't a hypothetical set of facts; I have two friends who fit these facts exactly.

[Belgarath]

Kirk - must get tough when writing out the dinner invitations! But I agree, I don't see how there is any invalidation of the prior divorce. And it therefore doesn't seem to me that the terms of the QDRO are invalid either (assuming not a sham in the first place.)

[Kirk Maldonado]

Belgarath:

I must admit that I am much more reluctant to take firm positions in my postings than many people on BenefitsLink. I try to ask questions, rather than to state facts. Also, when I do take a position, unless I am 1000% (not a typo) sure that I am right, I tend to caveat my responses so that I don't have to eat crow (or at least avoiding having to eat the beak and claws) if I'm wrong. Go back and read a number of my postings and you will see this pattern in my postings.

Correspondingly, I must confess that I am very surprised at the number of posters that take black and white positions without doing the necessary research and/or thinking things through first. When you take rigid positions that produce absurd results, you have to anticipate that people will point them out.

I will admit, that I could have have been gentler. Similarly, Pension Newbee could have expressed those views in a less outspoken manner, such as by using one the following approaches to get exactly the same idea across:

Does anybody think that the plan could take the position that the subsequent marriage invalidates the prior divorce?

Would it is be reasonable to the position that the subsequent marriage invalidates the prior divorce?

What about the view that the subsequent marriage invalidates the prior divorce? Does anybody think that this makes sense?

If others think that I've made an error in judgment in any of my posting, please correct me. I wholeheartedly encourage others point out any fallacies in my logic that they spot, because I'd much rather be corrected here on BenefitsLink than by a judge or by the IRS.

[david rigby]

...1000%...

Remember the last time you heard that, in 1972?

[Kirk Maldonado]

Pax:

I don't, but something tells me I may end up regreting having used that phrase.

Could you tell us in what context somebody else used that phrase?

[david rigby]

George McGovern. "I support Senator Eagleton 1000%."

[Belgarath]

Kirk - since you responded to me, I just want to make sure you aren't reading anything negative into my response, and maybe you weren't. The comment about the dinner invitations was purely an attempt at humor, what with the switcheroo of the marriages and divorces.

Other than that, I'm baffled that you think you could have been gentler, as all you did was express an opinion. Seemed pretty gentle to me. Ditto for pension newbee - that was just an opinion as well. And I think that anybody on these boards recognizes (or should recognize) that an opinion by anybody here is just that. Even an opinion with no citations is worthwhile - if you post a question, and get 8 opinions on one side of an issue, that at least provides for some indication that the position isn't necessarily crazy. There are a lot of very bright and experienced people here, and their opinions are likely to be pretty good.

We're all professionals here, and reasonable people can have strong opinions and disagree without taking offense. As long as the responses don't get personally abusive, I've never seen why folks should have to worry about being "politically correct" in their responses.

So from my viewpoint, you certainly don't have to worry about carefully phrasing a response. I'm not easily offended!

[PensionNewbee]

Gee, Kirk, I'm sorry I didn't check with you before I posted a response. I thought I phrased it as a question, not an absolute hard truth. Pax, thanks for seeing my response for what it was.

[jane123]

Aww guys!! I really don’t want to stretch this out any further…but… I think we all enjoy posting here and helping each other….and I can see Kirk’s point of view. Most of us know Kirk by reputation- heck, the IRS and other respected professionals (in reference books I might add) refers to one of his letters as “ The Kirk Maldonado letter”...or "the Maldonado Letter"), . You don’t want to take chances with a reputation like that…also, being cautious helps the poster and the rest of us to analyze the question ---also, in most cases, other facts of which were not posted could change responses well…maybe not in this particular post.

Most of us use an alias---so even if we are wrong, it may never affect our reputation anywhere other than this board. But when everyone in the pension field knows who you are, and your reputation is important to what you do, you must be cautious.

Pax, Belgarath, I love you too. PensionNewbee, you seem nice, but you are a newbee so I don’t know you well enough yet … I think I will like you when I get to know you better

Now can we all just get along?

[Guest DWL]

Back on the original topic, you might want to take a look at DOL Op. Ltr. 99-13A, which expresses the DOL's views on a plan administrator's duties when it receives a QDRO that shows signs of having been obtained fraudulently (i.e., a sham divorce for the purpose of "liberating" DC account balances not otherwise eligible for distribution).

[Belgarath]

Hey, did you see the text of DOL Advisory Opinion 2004-02a(on Benefits Link) this afternoon? While it doesn't address the specific question that started this thread, the reasoning the DOL uses is instructive. It would appear to me to bolster the position that the previous QDRO isn't affected. BUT, it also seems to make clear that an existing QDRO can be subsequently amended. See excerpt below. Nice of them to have the timing so perfect!

A plan administrator may determine that an order is not qualified only on the basis of the requirements set forth in section 206(d)(3) of ERISA. In our view, nothing in section 206(d)(3) suggests that a State court (or other appropriate State agency or instrumentality) may not alter or modify a previous domestic relations order involving the same participant and alternate payee, as long as the new domestic relations order itself meets the statutory requirements.

[Kirk Maldonado]

Belgarath:

I must confess that I completely misunderstood your comment about dinner invitations. But now that you explained it, I think that it is very witty. Sometimes that degree of subtelty is lost on me.

I disagree with the DOL's reasoning in DOL Advisory Opinion 2004-02A. I just don't see how you can read the statutory language in a way that reaches that result. While that might be the right result is from a policy perspective, I don't think that allow the agency to read into the language an exception that it wishes were there (but isn't).

I wonder if the DOL would be as accomodating if an employer wanted to read into a statute an exception that isn't there, if the DOL disagreed with the result sought to be achieved by the employer.

I believe that that statutes should be interpreted the way that they read, without regard to the agenda of the person interpreting them. Thus, agencies should have no more authority to interpret statutes in a way that forwards their political agendas than employers have.

I also believe that is the way that the U.S. Supreme Court (at least as it is currently composed) interprets ERISA statutory provisions.

DWL:

You bring up a very good point that none of us seem to have focused on before. Unfortunately, trying to decide the underlying motives of the parties is a difficult task, at best.

[Guest DWL]

Indeed it is, and the DOL opinion is very little help. As I read it, the DOL is basically saying that the employer is not obligated to investigate the validity of a state-court order under state law but cannot ignore large red flags. I don't know where you draw the line. I also have some up-close familiarity with perfectly legitimate divorces and remarriages, so I know it's not all that unusual, but if the situation in question involved an HCE, a DRO providing for a large distribution to the ex-spouse, and a quick remarriage, I might be asking some questions, too.

[JanetM]

Halka, what is your plan policy on qdros. When I arrived here as plan administrator, one of the staff was keeping track of a couple hundred alt-payees because the policy was the alt payee could not receive distribution until participant was eleigible to receive distribution (just like in the DB plans). Since that was nuts under DC plans I changed policy to treat alt-payees like term'd participants.

Your last question - does the Trustee have responsibility. Would depend on if they are directed trustee. Does the Trustee have the authority to act without plan sponsor direction?

Is this DB or DC plan?

[Guest Kevin Wiggins]

1. JanetM:

You might want to consider that your policy on AP distributions should match your plan distributions. If you want to give APs the right to receive a distribution earlier, it might be reasonable for you to amend your plan.

Even if you don't have such a plan provision in your plan, you might want to consider whether ERISA and the IRC require you to allow the AP to take a distribution at the time the participant attains "Earliest Retirement Age." See 414(p)(4). If it is in the least bit possible that ERISA and the IRC do, then if your staff did not let the APs take a distribution at the participant's "earliest retirement age," but are making them wait until later when the participant is eligible for a distribution, then would it be reasonable for you to maybe consider that your plan might need to be corrected?

2. Kirk:

I'm curious. What is your disagreement with the DOL's opinion? Is it that a QDRO that reduces the AP's benefits does not "create or recognize" or assign etc.? Or is it something else?

By the way, good point on making absolute statements. Do you think it is at all reasonable to consider that I could in some small way have been guilty of doing that?

[Kirk Maldonado]

Kevin Wiggins:

Thanks for questioning me on that point. As a result of your inquiry, I went back and re-read the Advisory Opinion. Upon further reflection, I withdraw my objection to it.

You handled this situation very deftly; asking me what was my position, rather than just flatly saying that I was wrong. Your question was an opportunity to enter into a dialogue, not a confrontation. Also, phrasing it that way makes the other person must less defensive, so that they can admit that they are wrong without losing face.

If you have been guilty of overstating positions in the past, I haven't noticed it. Taking an absolute position is fine, as long as you are right, or at least have done the research.

Another point that I believe is, if you make a mistake, like I did in this thread, you need to admit it quickly and openly. That is particularly true if you have pointed out the errors in others reasonings, as I have. I will just as quickly point out that I was wrong as I will point out that others are wrong. Anybody who has read many of my posting will note that I have made my share of blunders too.

Criticizing others, but being unwilling to admit one's own mistakes is a serious character flaw in my book. I believe that willingness to admit quickly and easily that you made a mistake can solve a lot of problems

[JanetM]

Kevin Wiggins:

I may have been vauge. Old DC policy was to make alt-payee wait until participant was eligible for distribution. With that policy we were keeping track of couple hundred employees so that we could notify alt-payee if they were eligible to take distribution.

DB plans are different, alt-payee can not receive distribution until participant is eligible for distribution.

DC plans were amended to reflect changes and QDRO policy was revised.

[Guest Kevin Wiggins]

Kirk:

Don't give up so easily. How can a QDRO that reduces benefits "create or recognize the existence of an alternate payee's right to, or assign to an alternate payee the right to, receive all or a portion of" etc.?

The only possibility is "recognize the existence of," here, recognizing the existence of the alternate payee to receive a reduced portion.

This is moot however, because the DOL has spoken. We're stuck with it.

JanetM:

In your plan, is the participant's "earliest retirement age" the same date as the date the participant is eligible for a distribution? For defined benefit plans that preclude a distribution until the participant attains age 65 and terminates employment, the “earliest retirement age” will most often be the date on which the participant attains age 65 (whether or not the participant terminates), not the date the participant is eligible for a distribution. It does, however, depend on what your plan says.

[Kirk Maldonado]

Kevin:

You raise a good point; being did the second QDRO create any rights or just diminish a portion of existing rights? If all it did was reduce rights, why does that work?

One response would be that, at the time the second one was entered, it automatically wiped out the first one, so that the alternate payee only has rights under the second one. Viewed from that perspective, the second QDRO creates (or resurrects) rights.

The likelihood of this analysis being supported by the wording of the QDROs, though, would be pretty small.

I don't think that the argument that you are creating a separate right to a smaller amount should work.

[Guest halka]

Guess I ought to reappear to explain/defend my oiginal question.... Some additional "facts/allegations" ...

...the remarriage closely followed the divorce in time (e.g. 3 months)

...the participant (an employer executive and plan fiduciary) is suspected of having 'mismanaged' the plan (and the company)

...the alternate payee did leave the QDRO in the plan until accusations about her husband arose.

I have no intention of telling anyone a divorce or marriage is invalid. The question was whether a remarriage by the participant and the alternate payee would or could affect the status of the AP. (e.g. suppose [for whatever reason] the AP wants to merge the QDRO amount back into the participant's account??)

The second part of the question is whether a trustee has any duty to challenge what appears to be a "divorce of convenience" w/ the objective of obtaining a plan distribution. I've now lost the citation, but there was such a "divorce scam" in a DOL letter. While that situation was egregious, there seemed to be indication that an administrator had to be "semi-alert" such events.

Anyway, I enjoyed the active exchange and comments.