Death of Participant

[Guest Kevin Wiggins]

A DRO for a DC plan gives the AP 50% of P's vested benefits as of a certain date, adjusted for earnings and losses from that date to date of distribution. The DRO does not treat the AP as surviving spouse of P for any reason.

P then dies before the AP receives a distribution.

What is the result if P dies before the plan receives the DRO?

What is the result if P dies after the plan receives the DRO but before the DRO is qualified?

What is the result if P dies after the DRO is qualified (but before the AP takes a distribution)?

What if (1) P never re-married or (2) P re-married and was married at death.

[QDROphile]

If the DRO was issued by the court before P's death and the plan did not distribute before it received the DRO, the the AP gets what the DRO provides if the DRO is otherwise qualified. P's demise is not a qualification defect. If the DRO is not qualified, the AP has a reasonable period to cure the defects, including amendment of the order if the state court will allow an amendment after P's death.

Same answer to all variations of the question. Courts in some jurisdictions may disagree. I recall that you and I disagree about ATT/Hopkins.

However, if the plan document or the written QDRO procedures provide for another way to deal with any situation, the documents might prevail. I don't know why the design would be otherwise except for a misguided general notion about timing of death, perhaps based on confusion with typical defined benefit plan design and concepts.

[Guest Kevin Wiggins]

What I'm getting at is whether in my form it would be beneficial or prudent to name the AP as the surviving spouse merely to secure the surviving spouse's benefits in the event of the P's death. The form would name the AP as the SS solely for the portion of P's benefits awarded to the AP (e.g., 50% as of X date) and the SS provision would expire when AP gets his or her benefits.

Remember, in my jurisdiction the Hopkins rule is law whether we agree with it or not (I'm not sure I do anymore, but that is a different discussion). If P re-marries and dies, then arguably the AP would be out under Hopkins because the successor spouse would be "vested" in his or her right to those benefits.

I think it is better to have this in the form if possible, but plans freak when they see the AP named as the SS for a DC plan and automatically reject the DRO. Plus, the drafting can get a little tricky. I know the situation would rarely arise, but when a drafting a model form it is better to cover this than not.

[QDROphile]

I sometimes see orders on DC plans with the surviving spouse provision that you are considering. I don't freak out because I ignore them. I ignore them because I know what they are trying to do and it is unnecessary under the plans I advise (even in Hopkins jurisdictions), consistent with my first response to you. I understand your plight in a Hopkins jurisdiction, but I don't know if you come out any better with the language. Anyway, by its terms, 414(p)(5) won't apply to a lot of DC plans because the plans are not subject to 401(a)(11) or 417. The reason 414(p)(5) relates only to 401(a)(11) is that the trick is unnecessary for a DC plan, consistent with my first response to your post. But I digress and become circular.

I can see how unschooled plan administrators would freak out, especially if the provisions are not properly drafted and many are not. Perhaps a very sophisticated and cranky plan administrator won't put up with the terms in a plan not subject to 401(a)(11). Would it help to state that the participant's death will not affect the AP's interest to the extent that the plan's surviving spouse benefit is sufficient to cover the amount awarded to the AP? I think that satisfies the requirement in 414(p)(5) for purposes of getting the protection (to the extent that 414(p)(5) applies) without actually calling the AP a surviving spouse, but that may be uncomfortable to a literalist. I also don't know if that language is any less freaky to a plan administrator.

I wish I could help more. Your goal is worthy; the path is difficult and uncertain. If everyone would just do things my way we would all be better off. :-)

[Guest Kevin Wiggins]

DC plans are not subject to 401(a)(11) and 417 but they are subject to 205 of ERISA and so, arguably, 206(d)(3)(F) of ERISA - the parallel to 414(p)(5) - is relevant to determine who is the "surviving spouse" for purposes of 205(b)(1)©(i) of ERISA. This issue, however, is not settled.

[QDROphile]

I agree that we should not forget ERISA, but my superficial reading of 205(b) (1) leads me to the conclusion that the carve out is the same.

Advisory Opinion 2000-09A makes an interesting comment on 203(d)(3)(F), which seems to support limitation of its scope. But then the outcome supports your position on the larger question, with reference to 206(d)(3)(B). It also supports my position that you don't need 414(p)(5) or 203(d)(3)(F) in the first place in most DC plans. By the way, that interpretation of 203(d)(3)(B) is also an argument against Hopkins/ATT.

The DOL has an uneven track record on QDRO issues, but I agree with this Advisory Opinion.

[QDROphile]

Other question about plan administrators and state law: I may be mssing the point because I don't see where "conflicts" enter into the relationship between plan administrators and state law. I don't know of any written material directly addressing the subject, but my view is that PAs need to steer clear of state law and have no role in speaking to either the participant or AP. Advisory Opinion 92-17A supports the idea that the PA is not responsible for state law matters. The PA does does not need to question a determination by a state authority on a matter of state law. A PA should stay out of any area for which the PA is not responsible. Dahlgren v U.S. West Direct, 12 EBC 2275 (D Or 1990) shows what happens to PAs when they try to help (not a state law issue). PAs should be reactive to domestic realtions matters. The most they should do in advance of receipt of an order or draft order is hand out the written QDRO Procedures, and perhaps refer people to the DOL QDRO book.

The incompetence of PAs with respect to state law (I don't use "incompetence" in a mean way; I am incompetent to advise about state law issues affecting property division despite understanding QDRO law) is one reason aginst preparation of model domestic realtions orders. Is the model compliant with state and local court rules? What about other states? An with respect to conflicts, the PA has to be neutral between participants and alternate payees. Unless a form is so general and vague as to defeat its practical purpose, the form suggests things that benefit one party or another unequally.

[Guest Kevin A. Wiggins]

So for an AP of a DC plan where the AP is in a Hopkins jurisdiction, do you think the AP potentially needs protection from the following potential scenario:

1. AP and P divorce

2. Then P remarries

3. Then P dies before taking a distribution.

4. The Plan receives the QDRO (but prior to distribution to subsequent spouse)

Hopkins deals with a QDRO received after the annuity starting date. But is it possible that the order of 2-4 doesn't matter? Once the QDRO is received or approved, is the amount awarded to the AP the AP's nonforfeitable benefit (assume P was 100% vested at divorce) or is it still a benefit payable with respect to the participant so that when P dies, P's subsequent spouse gets the benefit (in a Hopkins jurisdiction) unless the QDRO names the AP as the surviving spouse? It seems to me the answer is the AP should get that benefit regardless of what the QDRO says about surviving spouse, even in a Hopkins jurisdiction. Maybe there is a case on this?

[QDROphile]

There have been several cases in the last few years. I don't remember details, but none of them give a complete picture. One at hand is Smith v Smith and Dupont, (D. NJ 2003) Civil Action No. 99-5973. I got my copy form the Rutgers law library: http://lawlibrary.rutgers.edu/fed/html/ca99-5973-1.html . Also look at Hogan v Raytheon (ND Iowa 2001) No. C00-0026. That decision may have been appealed. I got my copy from the court's website: www.iand.uscourts.gov. Neither of those cases have a subsequent spouse.