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Sham Divorce?


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In case you were following the Continental Airlines case, where several pilots allegedly (?) created sham divorces so that a QDRO could be used to get at qualified plan money, it appears the judge has said "none of your business" to the company.

http://www.chron.com/disp/story.mpl/business/6675081.html

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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  • 1 month later...

In this same regard, I have been asked to prepare at least two QDRO's recently before the divorce is final. I have been told that the parties have "agreed" to proceed with the division of the (usually) 401(k) plan before the divorce is final, because the (usually) wife needs the money now. I have always given the opinion that the QDRO can only be effective when there is a property division. Because the property division is not effective until the divorce is final the DRO is not "qualified" until the decree is signed. See the Ablamis decision form the 9th Circuit and Boggs from the USSC.

Does anyone approach this issue differently?

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Being well past 30, 40 and 50, what does "IMHO" stand for?

Anyway, nothing prevents the court from signing the order well before the final decree of dissolution. My question is whether there can be a QDRO (even if signed by the court) if there has not been a property division. The property division does not occur under state law until the court signs the decree.

What if the parties reconcile? (Fat chance, but it could happen.) The Continental pilots would not have had to get divorced. They would have had to file for divorce, get a QDRO, divide the plan, reconcile and dismiss the divorce proceeding.

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  • 3 weeks later...

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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  • 2 months later...
Guest Bayern688
In case you were following the Continental Airlines case, where several pilots allegedly (?) created sham divorces so that a QDRO could be used to get at qualified plan money, it appears the judge has said "none of your business" to the company.

http://www.chron.com/disp/story.mpl/business/6675081.html

Question - If there is an existing QDRO on behalf of the ex-wife, is there a timelimit for filing a reverse QDRO? I had an attorney who never informed me about that I could go after my wife retirement also.

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In case you were following the Continental Airlines case, where several pilots allegedly (?) created sham divorces so that a QDRO could be used to get at qualified plan money, it appears the judge has said "none of your business" to the company.

http://www.chron.com/disp/story.mpl/business/6675081.html

Question - If there is an existing QDRO on behalf of the ex-wife, is there a timelimit for filing a reverse QDRO? I had an attorney who never informed me about that I could go after my wife retirement also.

I dont understand. Is a there final decree of divorce and a division of marital property?

mjb

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Why does it matter? Final decrees can be modified by the court. So, no, there is no time limit.

IT MATTERS A LOT. Most divorce decrees incorporate a property settlement between the parties that includes the division of pension benefits. In many states the property settlement is an executory agreement which is binding under the state law of contracts. The QDRO that is issued by the court provides the details of how the pensions listed in the property settlement are to be divided in a manner that will be approved by the Plan administrator under ERISA. If a pension is not listed in the property settlement then a party would have to petition the court to reform the property settlement to include the missing pension benefit. Courts dont reform contracts lightly otherwise there would be no finality to final decisions. In order to reform the contract there would have to be a meritorious reason such as fraud by the other party. The limited facts in Bayern's post indicates that his attorney failed to inform him of a right to his ex's pension which woulld fall into the category of a unlilateral mistake by his agent (lawyer) which would not be grounds to reopen the property settlement since it did not involve fault of his ex spouse.

In cases where the retirement benefits are awarded in the divorce decree instead of a property settlement the court would require a meritorious reason to modify the decree similar to setting aside the settlement agreement, other than that the participant's lawyer failed to inform him that he had the right to receive a portion of his ex's pension.

The issue of setting aside QDRO benefits comes up when a participant who gave his ex the right to his survivor annuity as well as a portion of his benefits in a divorce comes back years later to request that the QDRO be modified so as to change the survivor annuity to his current spouse because he did not realize that this benefit right would be valuable if he remarried. What basis would there be for a court to modify the QDRO and take away the survivor benefit from the ex?

mjb

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I don't dispute anything that you write, but I wasn't commenting on the likelihood of reversal, just whether or not reversal is precluded. It isn't. And it would be up to the law of the state involved as to what hurdles would need to be cleared before allowing a reversal. We don't know whether the OP's attorney never informed him of the ability to go after the ex-spouse's retirement was due to fraudulent disclosure or whether it was ignorance.

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  • 2 years later...

Court of Appeals upholds the District Court:

http://www.mhco.com/Library/Articles/2012/...ont_083012.html

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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