Must QDRO be Received Before Death?

[Appleby]

Interesting decision on the subject at http://splitcircuits.blogspot.com/2008/06/...g-circuits.html

[Guest Kabert]

Wasn't there something in PPA 06, and subsequent DOL guidance, re: timing of QDROs? I don't recall exactly whether it covers this issue, but I thought so.

[J Simmons]

In regs issued 3/7/07 by the DoL under 206(d)(3), QDROs may be issued even after the death of the participant.

However, as I recall in the case Appleby pointed out, there was a single life annuity that ended with the participant's death and after death, a QDRO was attempted to create a survivor benefit. However, the single life annuity was computed on just that, a single life, and the benefit completely paid. In that situation, a post-death QDRO would have the effect of requiring the plan to pay more benefits than called for under the plan.

The new regs would have more of an application as to a DC plan when there is a balance remaining in the plan on the death of the participant.

[QDROphile]

I think the new regulations allow an order issued before death to be modified to correct qualification defects. I would not accept an order that originated after the death of the participant. A plan could be designed to accommodate such an order, but I would not design a DB plan to do so.

[Guest mjb]

I think the new regulations allow an order issued before death to be modified to correct qualification defects. I would not accept an order that originated after the death of the participant. A plan could be designed to accommodate such an order, but I would not design a DB plan to do so.

There are valid reasons for both accepting a QDRO which is issued after the death of a participant as well as valid reasons for refusing to accdept such an orider. The death of a participant shortly after after the divorce is issued should not prevent a QDRO from being enforced by the spouse. However, a plan should not be requried to pay a beenfits when the ex obtains a court order after the death of the employee which provides additional rights that were not awarded when the parties where divorced. In Samoroo, the ex was awarded a portion of the employee's retirement benefit after he retired. After the employee died prior to retirement the spouse obtained a new QDRO which provided her with pre retirement death benefits. The plan objected on the grounds that there were no survivor benefits payable upon the death of an unmarried participant and the court agreed. The more difficult case is where the ex does not file a DRO until the employee has died and spouse #2 is recieving a survivor benefit. In these cases the rule of Boggs v.Boggs should apply to protect the surviving spouse's benefit.

[QDROphile]

We disagree about whether or not AT&T v. Hopkins in correct.

[Guest mjb]

We disagree about whether or not AT&T v. Hopkins in correct.

Do you disagree that the doctrine of latches would prevent recovery by the ex.?

[QDROphile]

I think the doctrine of latches is alive under ERISA, so it could have effect. Do you think a plan administrator would be in a position to make the call?

[Guest mjb]

I think the doctrine of latches is alive under ERISA, so it could have effect. Do you think a plan administrator would be in a position to make the call?

The PA could deny the claim by the ex and force the ex to go to court to assert her rights.

[QDROphile]

Except in extreme cases, as plan administrator I would put the burden on the person who depends on the laches argument to be the one to go to court to assert it. I know we disagree on the law, so you will be unimpressed with my desire for the plan administrator to favor the statute in making decisions, and forcing those who do not like the outcome provided by the statute to bear the burden of bringing the lawsuit based on the exceptional circumstances. A laches argument is a bit too exotic in light of a statue that makes no express provision for time limits and no good regulatory guidance on the subject. The new regulation contemplates many months of delay in determining qualification, with no suggestion of outer limit. That is differrent from delay in reporting the domestic relations order to the plan administrator, but we have no sign of time sensitivity in the regulatory guidance.

[Guest mjb]

Except in extreme cases, as plan administrator I would put the burden on the person who depends on the laches argument to be the one to go to court to assert it. I know we disagree on the law, so you will be unimpressed with my desire for the plan administrator to favor the statute in making decisions, and forcing those who do not like the outcome provided by the statute to bear the burden of bringing the lawsuit based on the exceptional circumstances. A laches argument is a bit too exotic in light of a statue that makes no express provision for time limits and no good regulatory guidance on the subject. The new regulation contemplates many months of delay in determining qualification, with no suggestion of outer limit. That is differrent from delay in reporting the domestic relations order to the plan administrator, but we have no sign of time sensitivity in the regulatory guidance.

Since ERISA is a law of equity equitable principles such as latches are applicable to benefit disputes. Latches has been used to defeat a plan's attempt at recovery of excess benefits. See Kaliszewski v Sheet Metal workers Pension fund, 2005 WL 2297309, where the court denied a plan's request to reduce a participant's benefits to collect overpayments on equitable grounds of including latches arising from a 9 year delay by the plan in discovering the excess payments.

[QDROphile]

I only said that the latches argument would usually be more appropriate for court consideration than plan administrator consideration. I did not say anything was wrong with the doctirne or it use nder ERISA. Do you think a plan administrator should choose not to try to correct an operational failure of overdistribution from a plan because of its own conclusion that laches applies?

[Guest mjb]

I only said that the latches argument would usually be more appropriate for court consideration than plan administrator consideration. I did not say anything was wrong with the doctirne or it use nder ERISA. Do you think a plan administrator should choose not to try to correct an operational failure of overdistribution from a plan because of its own conclusion that laches applies?

The amount of money to be recovered will determine how much effort is to be expended. It if is only a few thousand and a DB plan has to collect it from a participant it wont be worth the effort to hire a lawyer. The best the plan can do is write letters requesting a return of the funds. (If the participant is receiving an annuity the plan can reduce future benefits to recover the over payments). If it is a substantial amount the plan should retain an attorney to make sure the correct procedures are followed in attempting a recovery. If there is a meritorius defense such as latches the plan should settle for a reasonable amount without commencing a lawsuit to avoid the risk of an adverse decision which denies all recovery. If a court denies recovery because of latches the plan could be liable to pay the participant's legal expenses. There is also the question of whether the recovery could be barred under the s/l available under state law.

Also the plan will have to incur expenses to identify the excess payments that are in the participant's possession in order for there to be a court ordered recovery of excess payments. If the participant has spent the over payments the plan will not be able to recover anything.

[Guest Benny Comply]

Now that some time has passed since PPA was enacted, I am hoping you all may have additional thoughts to offer regarding a posthumous QDRO.

A recently deceased, unmarried term vested DB plan Participant divorced prospective AP over 15 years ago. Divorce decree indicated "retirement issues reserved." (Since participant had not elected to commence benefits, no beneficiary designation is on file.)

Prospective AP's attorney has now submitted a draft DRO to Plan Administrator for pre-qualification in which AP is to be awarded a preretirement survivor annuity.

In general, the Plan provides only for a death benefit paid to a surviving spouse to whom the Participant was married for the 1 year period ending on date of death. No alternative death benefit is available. However, I know a QDRO can provide for treatment of a former spouse as the Participant's spouse with respect to spousal survivor benefits.

What issues should be considered by the Plan Administrator in our decision to either qualify or reject the QDRO?

Any discussion is greatly appreciated.

Benny

[QDROphile]

If not for the QDRO, if allowed, would any benefits be paid to a beneficiary? If so, would the QDRO reduce benefits payable to the benficiary?

My initial reaction is to deny, but the plan may decide otherwise depending on anticipated contest.

[Guest Benny Comply]

If not for the QDRO, if allowed, would any benefits be paid to a beneficiary? If so, would the QDRO reduce benefits payable to the benficiary?

My initial reaction is to deny, but the plan may decide otherwise depending on anticipated contest.

No, in absence of the QDRO, no benefits are payable to a beneficiary.

Does the fact the Participant is already deceased prevent the ex-spouse from being named as a surviving spouse in a QDRO? I should mention that the court of jurisdiction is in CA.

[mbozek]

Now that some time has passed since PPA was enacted, I am hoping you all may have additional thoughts to offer regarding a posthumous QDRO.

A recently deceased, unmarried term vested DB plan Participant divorced prospective AP over 15 years ago. Divorce decree indicated "retirement issues reserved." (Since participant had not elected to commence benefits, no beneficiary designation is on file.)

Prospective AP's attorney has now submitted a draft DRO to Plan Administrator for pre-qualification in which AP is to be awarded a preretirement survivor annuity.

In general, the Plan provides only for a death benefit paid to a surviving spouse to whom the Participant was married for the 1 year period ending on date of death. No alternative death benefit is available. However, I know a QDRO can provide for treatment of a former spouse as the Participant's spouse with respect to spousal survivor benefits.

What issues should be considered by the Plan Administrator in our decision to either qualify or reject the QDRO?

Any discussion is greatly appreciated.

Benny

ERISA is a law of equity and the rule of equity swings both ways for the participants as well as the plan. Most courts have adopted the principle that a QDRO must be filed with the plan administrator before benefits commence because the plan needs to know its liabilities to pay benefits to all parties since any benefits to an ex spouse will be a liability to the plan. See Samaroo 193 F3d 185, where the 3rd circuit rejected a DRO issued by a state court after the death of a participant before retirement which modified a QDRO issued prior to the participant's death so as to add a pre retirement spousal death benefit that had been omitted in the QDRO approved by the plan.

In the case of an unmarried participant, vested benefits can be forfeited because of death prior to retirement and the plan treats the savings as an actuarial gain. Where the plan has no notice of any contingent benefits payable to an ex spouse under a QDRO it books the entire actuarial amount of the forfeited beneft as a gain to the plan.

Where the AP delays filing notice of a proposed DRO with the plan until after the death of an unmarried participant the plan can reject the DRO on the grounds that there are no benefits payable to the AP under the plan at the time the DRO is filed since an unmarried participant's benefits are forfeited at death.

The plan could also deny payment under the equitable doctrine of latches which is the unreasonable delay of 15 years by the ex spouse in filing a DRO which caused detriment to the plan -financial liability to pay the survivor benefits that was not anticipated.