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Participant dies & alt payee, w/ only a divorce decree, claims 1/2 of pension


Guest cstrong

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Guest cstrong

A DB plan participant dies. His former spouse claims she is entitled to 1/2 of his pension during the time they were married pursuant to her divorce decree (which does say she is entitled to 1/2 of his pension); however, neither a DRO nor the divorce decree (until now) was ever presented to the plan. Do we have to comply with the divorce decree?

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There have been a few discussion threads on this topic. For example,

http://benefitslink.com/boards/index.php?showtopic=21669

You can use the Search feature to find others.

Probably the Plan Administrator will discuss this with the Plan's counsel, who will then decide whether the claim has any merit, and may then inform the former spouse that the plan is not permitted to honor anything but a QDRO.

Don't forget to review the plan provisions on claim procedures.

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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Making a few assuptions, this situation is the crux of the problem with post-death QDROs. The general rule (which is not the rule in some jurisdictions) is that the divorce decree, before the death, gave the alternate payee the right to an interest under the plan. That interest survives death of the participant. If the participant dies before an interest was awarded, the former spouse is out of luck. However, the divorce decree, which is a domestic relations order, probably fails to qualify. The alternate payee is entitled to a reasonable opportunity to cure the qualfication defect, even after the participant's death.

Now comes the fun part. According to some commentators on this Board, some state courts will not issue another order after tha participant's death, so the AP will not be able to cure. Do not pass GO.

If the AP can pass GO, you have a difficult issue. The original divorce probably did not expressly award any of the DB death benefit. In many DB plans, only a surviving spouse will be able to get the death benefit. An AP can get all or part of the spouse death benefit if the order awards it to the AP. I think the award must be express and not implied from a general award of an interest under the plan. Remember that if the court did not award an interest to the AP before the participant's death, the AP gets nothing. Is that what happened with the death benefit? Is it OK to go back to court and get some or all of the death benefit that the court did not originally award before the death? Personally, I think not, and the AP's recourse is only a malpractice action against her lawyer. But we do not have solid authority on the subject, except in those jurisdictions that blindly shut the door at death.

The plan will need legal advice because the issue is tricky and unsettled and the courts have split on some of the related key issues.

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There is no definitive answer to this question because ERISA is a law of equity in which the judges are required to do justice to the parties (e.g., there are no jury trials). Thus the fact that a DRO was not presented to the Plan admin before the part. dies will not prevent spousal right to benefits awarded to a AP if the Plan Admin is on notice that the divorce decree provided for the AP's rights under the plan and the DRO is filed with the Plan admin within 18 months. Hogan v. Ratheon Co, 2002 WL 31027574.The problem is that some divorce decrees do not spell out the AP rights to survivor benefits. The participant's sudden death shortly after the divorce decree is issued should not prevent the AP from receiving the spousal benefits if the divorce decree specified the APs right to surviving spouse benefits. However, an unreasonable delay by the AP in preparing a DRO after divorce can prevent the transfer of the benefits under the equitable doctrine of latches. In other words a 15 year delay in presenting a DRO for spousal benefits to the Plan admin could prevent the award of the benefits.

Finally a part. who dies before the divorce decree is issued is considered to be married on the date of death and the spouse is entitled to all spousal retirement benefits since an action for divorce is terminated at the death of one of the parties. Davenport, 146 F Supp 2d 770.

mjb

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