QDRO: recommended or required?

[Guest Patriot01]

In order to pay a benefit from a qualified defined benefit plan, is a QDRO required or recommended?

I have a Dissolution of Marriage from 1987 that clearly assigns 1/2 of the benefit to the ex-spouse. The participant died last week (intestate, if that matters), and no DRO was drafted.

I realize that from a taxation standpoint, it is in the participant's best interest to ensure that a DRO is drafted and qualified.

Also, how does one pay a benefit from a plan in the instance where the participant won't produce a copy of the divorce decree or QDRO? Is there some other means by which the Plan Admin/Sponsor might affirm that the benefit is not partially assigned to an ex-spouse?

Any help, advice, experience, guidance, etc. is greatly appreciated.

[E as in ERISA]

The Dissolution of Marriage doesn't qualify as a domestic relations order? Or is the problem that it doesn't contain the necessary terms to be qualified?

[Guest Patriot01]

I don't believe it would qualify, because it simply says that since the parties were married during the participant's entire tenure, the ex-spouse is entitled to one half of the benefit payable to the participant at the time that the participant elects to commence the benefit. SSNs, addresses are not mentioned in the document.

[Lame Duck]

The decree of divorce is a matter of public record and a copy can be acquired from the Clerk of the Court in the county where the divorce took place.

[Guest Patriot01]

OK. So, then if the Divorce Decree mentions that the marital asset split includes the retirement plan assets, how does one obtain a copy of the DRO?

[david rigby]

... from a taxation standpoint, it is in the participant's best interest to ensure that a DRO is drafted and qualified.

Seems like the alternate payee would be concerned about this also. Isn't the burden of action on the AP (and the AP's attorney)?

[Harwood]

I don't believe it would qualify, because it simply says that since the parties were married during the participant's entire tenure, the ex-spouse is entitled to one half of the benefit payable to the participant at the time that the participant elects to commence the benefit. SSNs, addresses are not mentioned in the document.

1. Does it [fairly] clearly specify the plan involved?

2. The DOL has said that addresses are not required in the Plan Administrator can easily determine them.

3. Is the benefit to the Alternate Payee clearly delineated? Or are there problems, such as a loan?

4. If the Dissolution of Marriage was filed in court, it can be a QDRO if it has the minimum amount of required information, such as items 1-4 above. There is no legal requirement for a separate QDRO document.

[E as in ERISA]

I.e., you might now have a pending DRO. Not necessarily qualified. But you should consider following your QDRO process, including making sure that you don't distribute the full amount to the estate before the issue is settled.

[mbozek]

I dont think the plan should take any action regarding the claims of the ex spouse without being served with a DRO since there is a good argument that any benefits that the ex was entitled to under the plan under the divorce decree were forfeited when the ee died without a DRO since apparently there is no mention of surviving spouse benefits. The only option for the ex spouse is to return to the divorce ct to see if a DRO can be issued retroactivey for SS benefits and then serve the DRO on the PA. The PA can reject the DRO for survivor's benefits because IRC 414(p) prevents payment of a benefit which is not permitted under the plan.

The facts are similar to Samaroo, 193 F3d 185, 1999, a NJ case where the ee died 3 years after divorce. The divorce decree provided that the spouse would receive 1/2 of ee's pension benefits but there was no provison for survivor benefits if the ee died before retirement. After death the spouse returned to NJ ct and had the divorce decree amended to provide for survivor benefits. The FEd ct held that any entitlement to spousal benefits under the plan had to be determined as of the date of the ee's death. The post death revision was not permitted under a QDRO because it would increase the plan's liability over what was intended under the plan.

[E as in ERISA]

Its not clear from the facts how and when you got the Dissolution of Marriage and whether by its terms the decree included an order regardng the pension.

[Kirk Maldonado]

Mbozek:

Wasn't the reasoning in Samaroo rejected in Patton v. Denver Post Corp., 179 F.Supp 2d 1232 (D. Colo. 2002)?

By the way, I've only read summaries of the cases, not the actual cases, so I could be way off on this point.

[QDROphile]

Patton can only be justified based on the failure of the plan administrator to disclose the plan benefit when the divorce proceeding was dividing the benefits. The proceeding did not have the opportunity to include the benefits in the division of marital assets. The fact the the plan had a hand in the problem makes it easy to argue that the plan can't object to the post-death fix.

The courts are in conflict over post death determinations, but I think the correct rule is emerging: If the division of the benefits is determined and set forth in a domestic relations order before the participant's death, then the order can be effective. If the plan benefits are not in the domestic relations order before death, the court cannot go back and create an interest for the spouse.

Under this rule, one must consider the Tise decision, which says the an alternate payee must have a reasonable opportunity to correct qualification defects in a domestic relations order. For example, if a divorce decree has a general statement that retirement benefits are to be divided 50/50, that decree might well fail to be qualified. But because the domestic relations order was entered during the participant's life, if the participant dies and then the defective order is presented to the plan, the alternate payee can go back and get a new or amended order that can qualify. The interesting question will be how much lattitude the new or amended order has. The new order should not change the original division. It cannot redivide the benefits to be 75/25. But can it create an interest in the death benefit when the original decree said nothing about the death benefit? Samaroo says no, and I tend to agree because we can't be sure whether the parties would have settled on a death benefit for the spouse (or what it would be -- I have seen significant disconnect between percentage of regular benefits and percentage of death benefits in the same order) and it is unfair to a subsequent spouse or the plan to allow the alternate payee unilaterally to capture an uncertain benefit at the expense of the subsequent spouse or plan. It is a close call, however, because one might be comfortable inferring that reasonalbe persons would divide the death benefit proportionately unless expreslly provided otherwise, but merely omitted that detail from the decree and would have included it in a later but expected "real" order for the plan. The state court would merely be interpreting the decree rather than adding a new benefit feature or modifying the benefit. Or not.

The Patton case can be reconciled because an uncontested error, or perhaps fraud, prevented the court from dividing the retirment benefits properly in the first place, so the alternate payee got a post-death opportunity to fix the problem with the fundamental division of benefits. Such cases will be touchy, but that is what courts are for, if only the courts could be trusted to undersatnad what they are really doing and not forget that the interest of more than the participant and alternate payee may be at stake. The state courst cannot be trusted. The federal courts are coming along.

A paramount rule in this scheme is that the plan has no obligation unless it is properly notified of the domestic relations order before it makes distributions or otherwise takes action that affects its assets. If the plan acts reasonably upon the death of the particpant before proper notification of the domestic relations order, whatever happpens after the the tardy notice will have to work around whatever the plan did and the plan will not have to suffer because of the tardiness of the alternate payee. For example, if the plan has no proper notice of the order and has distributed the benefits to the beneficiary in regular course, the alternate payee is out of luck with respect to the plan. What constitures proper and timely notice has been discussed in other posts.

[Guest Kevin Wiggins]

If the distribution has not yet been made, then you might want to try getting a nunc pro tunc QDRO.

[Guest Kevin Wiggins]

In looking again at your question, the answer is a QDRO is not required for a plan to make a distribution. However, if your client is not the surviving spouse, then the QDRO will give you (or your client) tax advantages.

The problem is you (or your client) may not be the surviving spouse because that person is determined here on the date of death. Even if you do get a QDRO, that might not help if you (or your client) was not the surviving spouse on the date of death. A nunc pro tunc QDRO, if you can get one, should work. However, usually a nunc pro tunc order is not permitted to change any provision of the original order. You may need to come up with some creative arguments to convince the state court judge that naming you (or your client) as the surviving spouse is what the original decree did.

[QDROphile]

If you need nunc pro tunc you are sunc.

[Harwood]

"Ursunc" would be a good name for a poster

[Guest Kevin Wiggins]

I'm not sure I agree. I've used nunc pro tunc, and I've used it quite effectively when otherwise I never would have gotten the QDRO.

[QDROphile]

Did anyone die in the process?