DRO Not Qualified....Now what?

[Guest MJAnderson]

5"] I have a client who was divorced in 1998. (Married 11 years) Ex-wife was to receive a portion of retirement per divorce decree.

Ex-wife and her attorney sent in a drafted DRO which PA rejected and stated reasons why. Attorney was sent another letter and given X number of days (90) to re-submit DRO.

The ex and her attorney did nothing to proceed with Qualifying the DRO. PA sent another letter letting ex and her attorney know, all holds on PP account had been removed.

My Client has since remarried (10 years now) and new spouse is listed as SS. He has been receiving his benefits for 20 months now and the ex-wife has come back with a new attorney claiming she wants her share.

My Question I guess is this...With PP being remarried for 10 years and her listed as SS, benefits commenced, with no QDRO in place, what, if anything, would be the ex-wife claim with No QDRO in place?

She is claiming she thought her attorney took care of it?

Either way, there was never a QDRO in place and it is over 10 years old....

Any information will be greatly appreciated.[/

[J Simmons]

The ship has sailed on the ex; the benefits have commenced payout. Check out Carmona v Carmona, Appeal Nos. 06-15581 and 06-15938 (9th Circuit Court of Appeals, 9/17/2008).

[Guest MJAnderson]

The ship has sailed on the ex; the benefits have commenced payout. Check out Carmona v Carmona, Appeal Nos. 06-15581 and 06-15938 (9th Circuit Court of Appeals, 9/17/2008).

We have a court date soon. Ex-wife's, new attorney, is trying to get Judge to do an admendment on the old DRO.

My arguement is this: These rights now belongs to the new wife who has 10 years invested in marriage and is named SS, besides the fact that retirement payments have commenced. What are the chances of a judge over turning this and could he on what grounds? I know they have done some pretty crazy things lately.

Appreciate any help in this matter

[J Simmons]

I think that a well-advised plan administrator would reject an amended DRO signed by the judge now.

What the ex-wife, her new attorney, and the divorce judge may try to do is make an adjustment in the other property division. I.e., since the retirement benefits are now probably off limits to the divorce division, the divorce judge orders the retiree to pay the ex-wife a certain amount of cash or give her some property he was originally awarded in the divorce.

[Guest Sieve]

John --

I read Carmona as standing for the proposition that a spouse at the time that a DB retirement benefit commences remains the beneficiary for the QJSA portion upon the retiree's death, despite a divorce after the commencement of benfits but before the death, and that the spouse at the time of the death cannot change that. But, I do not see that it would prohibit the former spouse to waive the benefit through a QDRO even after the commencement of benefits.

But, I see the OP as a different situation. If a divorce decree already provided that a portion of the retirement benefits would go to the former spouse, why wouldn't the family court, which certainly has continuing jurisdication, permit the filing & perfection of a QDRO which memorializes what was agreed upon, even if benefits have commenced? Why should a PA reject such a QDRO--at least, why reject it as to benefits which have not yet been paid?

[J Simmons]

I read Carmona as standing for the proposition that a spouse at the time that a DB retirement benefit commences remains the beneficiary for the QJSA portion upon the retiree's death, despite a divorce after the commencement of benfits but before the death, and that the spouse at the time of the death cannot change that. But, I do not see that it would prohibit the former spouse to waive the benefit through a QDRO even after the commencement of benefits.

The way I see Carmona, when an employee's benefits commence the spousal rights vest and another spouse cannot change that by then obtaining a QDRO. That is so whether the other spouse is one the retiree later marries, as Judy in Carmona, or an earlier spouse who had not perfected a QDRO before benefits payout commenced, as in the original post in this thread. 9CA in Carmona: "This case presents an issue of first impression in this Circuit: whether a 'plan participant's retirement cuts off a putative alternate payee's right to obtain an enforceable QDRO' with regard to the surviving spouse benefits of a QJSA. Tise, 234 F.3d at 423 n.6. We are persuaded that IATSE's interpretation is correct and that the answer to this question is 'Yes.'" and " the QDRO was unavailable to Lupe in this instance because Janis's surviving spouse benefits had already vested at the time he retired."

As for a spouse waiving a benefit through a QDRO, before or after commencement of benefits, the Supreme Court has ruled that QDROs may be used to award an interest in benefits, but not waive an interest in benefits. Kennedy v. Plan Administrator for DuPont Sav. And Investment Plan, No. 07-636 (U.S. 1/26/2009): "There is no QDRO for a simple waiver; there must be some succeeding designation of an alternate payee".

But, I see the OP as a different situation. If a divorce decree already provided that a portion of the retirement benefits would go to the former spouse, why wouldn't the family court, which certainly has continuing jurisdication, permit the filing & perfection of a QDRO which memorializes what was agreed upon, even if benefits have commenced? Why should a PA reject such a QDRO--at least, why reject it as to benefits which have not yet been paid?

I think most family courts would naively attempt to fashion a new "QDRO" even after the QJSA and surviving spouse rights have vested upon commencement of benefit payments. The Nevada family court did just that. That doesn't mean that the order is efficacious or should be honored by the plan administrator. In fact, the plan administrator that would find such an order to be a QDRO and implement it faces paying the same benefits twice: once as ordered under the "QDRO" and again to those whose QJSA/surviving spouse rights were thereby divested.

[Guest mjb]

John --

I read Carmona as standing for the proposition that a spouse at the time that a DB retirement benefit commences remains the beneficiary for the QJSA portion upon the retiree's death, despite a divorce after the commencement of benfits but before the death, and that the spouse at the time of the death cannot change that. But, I do not see that it would prohibit the former spouse to waive the benefit through a QDRO even after the commencement of benefits.

But, I see the OP as a different situation. If a divorce decree already provided that a portion of the retirement benefits would go to the former spouse, why wouldn't the family court, which certainly has continuing jurisdication, permit the filing & perfection of a QDRO which memorializes what was agreed upon, even if benefits have commenced? Why should a PA reject such a QDRO--at least, why reject it as to benefits which have not yet been paid?

How do you know that the family court still has continuing juirsdiction? What if a s/l has expired, e.g., the transfer of the the pension rights was a property settlement which is a binding contract which has a s/l to exercising rights? If the spousal right to property are considered equitable under state law then the failure to enforce such right for 11 years will be subject to the doctrine of latches.

Since benefit rights under ERISA are equitable in nature the failure to proceed with qualifying the DRO for 11 years would be subject to the doctrine of latches for unreasonable delay if the AP attempted to enforce those rights against the current spouse.

Alternatively the plan admin will reject any attempt to give surviving spouse benefit rights to the AP because such benefit becomes the vested property right in the current spouse at the time the employee retired. As noted in Carmona "under 1055(a) QJSA benefits are particular to the surviving spouse and the only way for the participant to opt out of the QJSA is for the participant and his spouse together to waive the QJSA benefit in writing. Both spouses may elect to decline the QJSA only duing the 180- day period ending on the annuity starting date. Thus the annuity starting date is the point at which the surviving spouse's benefits vest in the participant's spouse."

[QDROphile]

Assuming no issue with state law, what prevents the former spouse from getting a share of payments to the participant during the participant's life?

[Guest mjb]

Assuming no issue with state law, what prevents the former spouse from getting a share of payments to the participant during the participant's life?

There is an issue with state law because it would change the allocation of the marital assets that was ordered in the judgement of divorce to benefit the spouse who failed to have a QDRO filed with the plan by giving the AP additional property. The AP's claim if any is against her attorney. This is no different than one spouse who chose to retain an asset at the time of the divorce such as a house or 401k assets asking the court to modify the judgement because the asset they chose to retain has declined in value.

[QDROphile]

Not having seen an answer, I renew the question.

[jpod]

QDRO: Answer = "nothing" (would prevent it).

[J Simmons]

Not having seen an answer, I renew the question.

Let's put some numbers on an example. Suppose during the marriage to ex-spouse, the benefit accrued was a right to $5,000/month (calculated as a single life annuity) after retirement at age 65. In the divorce, ex-spouse is awarded 1/2. A year after the divorce, the employee marries spouse2. A year after that, employee retires when the accrual is now $5,200/month (again for benefit estimate purposes calculated as a single life annuity). Spouse2 refused to waive QJSA, and so the payout is now $4,100/month for retiree's life and $2,050/month to spouse2 thereafter (forgive me, actuaries, these numbers are just for illustration, not intended to be the result of calculations).

Now, years later and after benefit commencement (and Spouse2's survivorship right vested), ex-spouse wants to get her 1/2 of accrued benefit at time of divorce, i.e. that 1/2 being $2,500/month. Divorce court awards it. Now, retiree is left with $1,600/month.

Had ex-spouse perfected her QDRO back in the day--before the benefit commencement--then retiree's remaining benefits, $2,700/month would have translated into lifetime benefit payout of $2,200/month to retiree and Spouse2's survivor rights would have been about $1,100/month.

As a consequence of the ex-spouse's delay (with or without the procratination or indifference of her attorney), retiree has suffered a $600/month loss because Spouse2's now vested survivor rights claim a bigger proportion.

Granted this is the laches argument for state divorce court, but mjb's laches argument has real teeth to it due to the consequences to the retiree from the ex-wife's delay.

[QDROphile]

Assuming no state law problems, nothing requires the numbers to be translated from the original award. The original award cannot be implemented as originally provided. The checks to the participant could be split on some basis, possibly taking into account the lack of diligence by the former spouse. One consequence of the delay is the election of a J&S annuity with a new spouse, which makes the current checks smaller than life annuity checks. So one would not expect the former spouse to be getting numbers resembling those that would have attained to a timely QDRO.

[J Simmons]

So one would not expect the former spouse to be getting numbers resembling those that would have attained to a timely QDRO.

I'll bet the ex-wife and her attorney are expecting, and will try to convince the divorce judge, those numbers to resemble those that would have attained to a timely QDRO.

[Mike Preston]

No doubt. Which is why, if MJAnderson is still reading this thread, he should be aware of the possibility and therefore recognize that he will no doubt need to hire an attorney to fight against that result. Pension practitioners might universally agree that it is unfair for a judge to do that, but the judge will not be aware of the unfairness unless it is properly explained.

[Guest Sieve]

John --

Yes, John, using your numbers, with a QDRO the former spouse would get what was promised in the divorce decree (but, of course, loses all amounts from retirement payments before the QDRO), and the participant gets less than currently. That may not be so unfair, however, since the survivor annuity is still a whopping $2,050/mo (rather than $1,100/month) in your very un-actuarial hypo.

I would suspect, therefore, that the participant & current spouse now receive benefits ($1,600/$2,050) that are far better, on an actuarial basis, than they would have received ($2,200/$1,100). Participant may be receiving $600 less in retirement, but there will be almost double the survivor annuity because the former spouse's portion was used to determine the survivor portion.

If there is no statute of limitations problem, why should the participant be able to get out from under the full portion awarded to the former spouse in the divorce decree just because the former spouse was not timely filing a QDRO? Should the participant somehow be rewarded for getting lucky that the divorce decree did not find its way into a QDRO prior to the participant's retirement?

[Mike Preston]

So much for universal agreement.

[J Simmons]

John --

Yes, John, using your numbers, with a QDRO the former spouse would get what was promised in the divorce decree (but, of course, loses all amounts from retirement payments before the QDRO), and the participant gets less than currently. That may not be so unfair, however, since the survivor annuity is still a whopping $2,050/mo (rather than $1,100/month) in your very un-actuarial hypo.

I would suspect, therefore, that the participant & current spouse now receive benefits ($1,600/$2,050) that are far better, on an actuarial basis, than they would have received ($2,200/$1,100). Participant may be receiving $600 less in retirement, but there will be almost double the survivor annuity because the former spouse's portion was used to determine the survivor portion.

If there is no statute of limitations problem, why should the participant be able to get out from under the full portion awarded to the former spouse in the divorce decree just because the former spouse was not timely filing a QDRO? Should the participant somehow be rewarded for getting lucky that the divorce decree did not find its way into a QDRO prior to the participant's retirement?

I don't think you get to just lump the retiree and Spouse2 together in the analysis because they reside in the same household. Spouse2's rights are very real and distinct from the retiree's--at least that's how REA looks to me.

[GMK]

For other comments (from 2006):

http://benefitslink.com/boards/index.php?showtopic=32163

Interesting reading, though it may not resolve the issue.

[Guest MJAnderson]

I have found all of this very interesting. I think that the new spouse, (having been married for 10 yrs) has a large investment into this marriage now.

For an ex spouse to come into the picture now, 20 months after retirement commencement, with nothing more than letters of rejection from the PA and having done nothing with these letters (knowing she did not have a QDRO in place for 10 yrs) Why Now? Why does she decide she wants to do something about DRO now (money of course)

But is it right under any law, that she can wait and file when she so chooses and would it then not be wrong to take into consideration the damage she would cause to PP and spouse 2.

If nothing else latches would be best argument as the very late, untimely filing now would be prejudices to the adverse party.

I am not saying that it is fair for either party at this point, but when do we draw lines in the sand for those who choose to procrastinate regarding their rights. Just a thought I am throwing out there to see if there is , strict guide lines, as to when you know you are not qualified, and choose to do nothing about it for years, why then should you be rewarded for waiting?

THOUGHTS?

PS Don't light into me..I am just asking some questions here OKAY>

[J Simmons]

I have found all of this very interesting. I think that the new spouse, (having been married for 10 yrs) has a large investment into this marriage now.

For an ex spouse to come into the picture now, 20 months after retirement commencement, with nothing more than letters of rejection from the PA and having done nothing with these letters (knowing she did not have a QDRO in place for 10 yrs) Why Now? Why does she decide she wants to do something about DRO now (money of course)

But is it right under any law, that she can wait and file when she so chooses and would it then not be wrong to take into consideration the damage she would cause to PP and spouse 2.

If nothing else latches would be best argument as the very late, untimely filing now would be prejudices to the adverse party.

I am not saying that it is fair for either party at this point, but when do we draw lines in the sand for those who choose to procrastinate regarding their rights. Just a thought I am throwing out there to see if there is , strict guide lines, as to when you know you are not qualified, and choose to do nothing about it for years, why then should you be rewarded for waiting?

THOUGHTS?

PS Don't light into me..I am just asking some questions here OKAY>

To sum up this thread, I would say that the Carmona case protects the surviving spouse annuity rights of spouse 2. As for the benefits being paid until the retiree dies, you need to make a laches argument in opposition to the divorce judge now entering a QDRO as requested by spouse 1.

By the way, do you really think any of us here light into anyone else?