Death Prior to Proposed QDRO Received

[J. Bringhurst]

Client received correspondence from AP's attorney placing all parties "on notice" of AP's claim, per property settlement agreement, to a portion of former husband's (Participant's) benefits under client's qualified retirement plans. Property settlement agreement does not, by itself, constitute a QDRO and no proposed DRO has been received. Correspondence from AP's attorney was drafted two weeks AFTER death of Participant and also states distribution of funds under the plans should be prohibited.

(1) Must I look to state law (PA) as to whether a post-death QDRO can assign benefits to the AP?

(2) If yes, does it matter that no proposed DRO was received prior to Participant's death?

(3) In any event, must Participant's benefits be suspended? If yes, for how long?

(4) If benefits need not be suspended, are benefits distributable in accordance with any valid beneficiary designations on file?

Ugh.

[J Simmons]

From a federal law perspective, a DRO issued post-death may yet be a timely QDRO. DoL Reg 2530.206©(2), Example 1. The example posits the situation where a DRO was issued pre-death, but found by the PA not to be a QDRO. Rectified DRO issued by divorce court post-death of the employee is submitted to PA. If otherwise properly a QDRO, it is not untimely. Your situation is slightly different--no DRO issued before death. However, that is an example under the general regulatory statement: "a domestic relations order shall not fail to be treated as a qualified domestic relations order solely because of the time at which it is issued."

Will a divorce court in PA issue a DRO after death of one of the divorcing parties? Depends on PA state law.

Period of benefits suspension? See the plan's written QDRO processing policy, required by ERISA section 206(d)(3)(G)(ii). I would think that as to the length of the period of suspension would need to weigh in the balance the interests of the deceased's death beneficiary, and the reasonable processing time that the putative AP needs to obtain the DRO.

[J. Bringhurst]

Thank you.

[Guest mjb]

You need to check state law to see if PA courts have power to issue a DRO after the death of one party. In some states court's power to divide property in a divorce action ends when one of the parties dies. Of course it is assumed that the employee died after a divorce decree was final. Otherwise the parties are deemed married and spousal benefits will be due.

While a post death DRO can be enforced under ERISA, it cannot provide for benefits that did not exist on the date of the employee's death. For example if the divorce decree provided only for payment of surviving spouse benefits (QJSA) which will be paid after the employee retires, a state court could not issue a DRO providing for pre retirement survivor benefits (QPSA) to the AP after the death of the employee because that benefit did not exist as the of the participant's death.

[Peter Gulia]

Leaving aside all other questions and issues, one might advise a plan administrator to consider carefully how it should decide whether a court's writing is or isn't a domestic-relations order.

Some practitioners quote the then-PWBA's 1997 QDRO booklet to support a view that "[a] plan administrator is generally not required to determine whether the issuing court or agency had jurisdiction to issue an order[.]" Page 16, Q 2-8. PWBA cited as its suppport for that view ERISA Advisory Opinion 92-17A. But that Opinion did not reach, and expressly set aside, the issue of whether the court had jurisdiction. (And, of course, the booklet is not a rule that a Federal court need defer to.) Further, the Opinion stated that the plan administrator must "determine" that the writing submitted to it is a domestic-relations order.

One phrase in the Opinion suggests that a plan administrator might assume that a writing is an order if it "is made pursuant to a State domestic relations law by a State authority with jurisdiction over such matters" even if the court lacked jurisdiction for the particular matter. But a more cautious view might be that it's unclear whether a court's writing is an "order" to the extent that the court lacked jurisdiction for what the order commands. (State law concerning a duty to raise jurisdiction questions and the effect of not doing so promptly shouldn't affect a plan administrator. In the usual situation, neither the plan nor the plan administrator would have been a party to, or otherwise would have appeared in, the State court proceeding, and so would not have had a duty or even an opportunity to raise jurisdiction questions.)

Although a plan administrator should not abandon its fiduciary duty to decide claims, in circumstances that involve an ambiguity about what the relevant law is a plan administrator might properly seek a Federal court's decision if the relation of the stakes and the plan expenses makes it prudent to do so. (Concerning an individual-account plan, a plan administrator might need to consider also whether to allocate all or some of the plan expense to the participant's account that's the subject of the question, and whether to allocate some or all of the plan expense generally among all individual accounts.)

Please understand that the discussion above is a pure hypothetical: I'm an ERISA guy, and I have not researched what powers a domestic-relations court (of Pennsylvania, or of any State) has after the death of one of the divorced parties.