Post-death qualified domestic relations order invalidated

[david rigby]

Interesting:

http://benefitsattorney.com/modules.php?na...=article&sid=34

As stated before, one hopes the drafter of the QDRO will remember to address all cases involving death:

- if the participant dies first and before any benefit commencement,

- if the AP dies first and before any benefit commencement,

- if the participant dies first after benefit commencement, and

- if the AP dies first after benefit commencement.

[Guest mjb]

There have been previous cases where courts have refused to permit nunc pro tunc QDROs to add survivor benefits that were not awarded to the AP at the time of divorce or in the QDRO on the basis that after the date of death no spousal rights can be awarded to an AP. This situation is distinguished from the cases where the participant dies after divorce but before a DRO that provides benefits to the AP under the divorce has been signed by the ct. or approved by the Plan admin.

[QDROphile]

And Files v Exxonmobil is wrong.

[david rigby]

Perhaps it is "wrong", but maybe you would be willing to share with us why you think so.

[QDROphile]

The court does not understand how DB plans work. The "separate interest" as described by the court in fact does cause the plan to pay more than the average DB plan is designed to pay (the court does not tell us the plan design); a "separate interest" must take into account the death features of the plan and cannot thwart those features. The court disregards the statutory language to the effect that an alternate payee does not get a death benefit unless the order expressly provides for it. I agree with the court that a domestic relations order does not have to be presented to the plan before the participant's death, but no order can insulate the alternate payee from the consequences of the participant's death unless the plan is designed to allow it. The only way to justify the result is to conclude that the plan was somehow responsible for a delay in the altnernate payee's start of benefits that caused the benefits to start after the death. Finally, while the alternate payee can go back to the state court to clear up qualification defects after the particpant's death, the division of the benefit must specify the essential property rights before the death of the participant. If death benefits under the plan are not awarded before the participant's death, that property interest cannot be awarded after death. The circumstances are too suspicious even to allow "clarification" of that point after the particpant's death -- it is either blatant adverse selection or correction of an error that should stick. The case should have been left as a malpractice case.

I am very concerned that the simplistic "separate interest" concept in the decision will allow bad orders to disregard plan design and the provisions of 414(p)(5).

[Guest mjb]

Q: A separate interest QDRO does not automatically require inclusion of death benefits in a QDRO. I have reviewed many separate interest qdros where the QPSA and QPSA benefits are separately negotiated and designated. The AP can be awarded a specific % of the participant's accrued benefit as a separate interest under the divorce decree without being awarded a QPSA or QJSA benefit. In some cases the AP receives a separate interest in the participant's benfits plus the QPSA and QJSA under the plan.

[QDROphile]

That is exactly my point and that is why the decision is wrong. The way the court incorrectly viewed the "separate interest" as disposing of the question, the court glossed over the separate death benefit issue. Having said that, we don't know much about the actual plan design, so I am assuming usual DB plan design. Even if the plan was designed in a way that justified the result, the failure of the court to point out the design feature (if any) means that its incorrect view of "separate interest" is going to plague us.

[Guest mjb]

I dont understand what is the problem. A separate interest under a divorce decree doesnt need to take any death benefit payable under the plan (e.g. QPSA) into account in determining the APs interest, e.g., 50% of the participant's accrued normal retirement benefits as of x date, which under the plan terms has a value of Y. If the AP is entited to 50% of Y then the plan creates a separate annuity benefit with a PV of 50% of Y in the name of the AP. The AP can receive any benefit option payable to any beneficiary based on the APs age without regard to mortality of the participant. This benefit is not a derivative benefit of the participant's benefit is in the way that a 50% QPSA would be and is not contingent in the participant's living to early retirement age.