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No Survivor Benefits in QDRO


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Husband and wife divorced. A QDRO awarding wife 50% of the portion of the pension earned during their marriage was ordered and filed properly, but no Survivor benefits were included in the QDRO. Husband remarried and then died before reaching retirement age. Is there anything that can be argued so that the first wife may receive some of his pension benefits?

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If no survivor benefits were included, and QDRO was written properly, death of the participant should not have any effect on the award benefit. Ex-wife should still be entitled to 50% of the portion of the pension earned during their marriage. New wife should be entitled to survivor benefit of the remaining pre-divorce and all post-divorce benefits. See if QDRO has any sections describing "If participant dies before commencement then..." 

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Check the statute. My interpretation (and that of a number of court decisions) of the provision to the effect that the AP may be treated as a surviving spouse to the extent provided in the QDRO is that in a DB plan with a QPSA, the AP must be expressly awarded some interest in the survivor annuity or the AP will get nothing if the AP does not start benefits (the 50% portion of the pension benefit described in the post) before the participant dies.  One way to look at it is that the death benefit is a different benefit that the regular benefit.  If the AP is not awarded some of the death benefit, the AP gets none.

While the proposition is untested, I think that the plan can adopt QDRO procedures that have a default to cover the failure to include a provision addressing death benefits (which is legal malpractice).  For example, the QDRO Procedures can provide that, absent terms in the contrary in the QDRO, the result of failure to specify the AP's interest in the QPSA will be as suggested by Calavera: the AP will get the death benefit associated with the portion of the regular benefit awarded to the AP.  I do not recommend such a provision on the QDRO procedures.

What can be argued on behalf of the AP is that the AP should be compensated for receiving nothing from the plan by the malpractice insurance carrier of the AP's lawyer who failed to assure that the AP did not get stiffed (pun intended) by the pre-retirement death of the participant, to the delight and benefit of the subsequent spouse.

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27 minutes ago, QDROphile said:

Check the statute. My interpretation (and that of a number of court decisions) of the provision to the effect that the AP may be treated as a surviving spouse to the extent provided in the QDRO ....

Yes, IRC 414(p)(5), includes "To the extent provided in any qualified domestic relations order...."

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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if it was a separate interest QDRO, her piece of the benefit inures to her when filed and she in essence becomes the participant for that benefit, except for a subsequent J&S on her commencement.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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Those suggestions are helpful! Thank you. 

I called NYCERS, the pension company, and they confirmed what I was afraid of and what y'all have been saying- that she is out of luck. 

Are there any creative arguments any of y'all have seen made that was successful in either modifying a QDRO or convincing the court that the ex-spouse should receive some benefits? 

This is really the fault of the attorney who drafted the QDRO, and it's just not fair that this woman will be out of the money, so I'm trying to figure out if there is a creative way to get it for her. 

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I feel that under the separate interest QDRO she cannot possibly be "out of luck" and she is still entitled to 50% of the portion of the pension earned during the marriage. Can you attach a QDRO so we can see actual language (just strip out all personal info).

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@Calavera  "HUSBAND is hereafter referred to as PARTICIPANT in the New York City Employees retirement System. 

WIFE is hereafter referred to as the ALTERNATE PAYEE in the New York City Employees Retirement System. 

....

ORDERED, that the pension benefits earned by the PARTICIPANT with the NYCERS, to the extent to which it has accrued during the marriage is martial property; and it is further 

ORDERED , that the Plan Administrator issue separate checks to the PARTICIPANT and the ALTERNATE PAYEE for their respective interests in the plan at the time its benefits become payable; and it is further 

ORDERED, that such time as PARTICIPANT has retired from and is actually receiving a retirement allowance from the NYCERS, the said NYCERS in accordance with the forumal devised in the case of Majauskas v. Makauskas is directed pay to ALTERNATE PAYEE from PARTICIPANT's retirment allowance 50% of the following fraction of PARTICIPANT's monthly retirement allowance: 

the numerator of the fraction shall be X...... and the denominator shall be the total number of months of service credit in the NYCERS which PARTICIPANT has at the time of retirement; and it is further 

ORDERED, that the term "retirement allowance" as used herein, shall be deemed to include any annuity as well as any supplemental retirement allowance including any variable supplement benefits fund payment, if any, and any refund of contributions which is paid by the said NYCERS; and it is further...." 

 

I think those are the relevant parts 

 

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Calavera and Cusefan:  There is no such thing as a separate interest QDRO as you (mis)understand the term.  It is possible that the plan, in the plan document or its QDRO procedures, has created a separate interest that fits your understanding. Section 414(p)(5) is an example (there are more)of how the law does not recognize your undertanding of "separate interest."

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Yes as to your conclusion, with respect to the plan.

The fourth, fifth and ninth circuit courts have ruled that the AP can get nothing from the plan because the law favors the subsequent spouse when no QDRO nailed down the AP's interest in death benefits before the second marriage and death of the participant. Only the ninth circuit's reasoning is persuasive, but the outcome is the same.  In light of those decisions, and my understanding of the state law in most states, I do not think it would work to try to reinvigorate the QDRO, for example by reformation to reflect the actual intent.  That might be worthwhile if the participant were alive.

I refer you to my original comment that recourse may lie in a malpractice action against her lawyer, no matter who drafted the order.  If she was not represented with respect to the QDRO, then I have nothing to suggest.

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On ‎4‎/‎7‎/‎2017 at 3:55 PM, QDROphile said:

Calavera and Cusefan:  There is no such thing as a separate interest QDRO as you (mis)understand the term.

I disagree with this statement. See https://www.pbgc.gov/docs/QDRO-model_separate.pdf, https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/qdro-drafting. for more information. QDRO says: "ORDERED , that the Plan Administrator issue separate checks to the PARTICIPANT and the ALTERNATE PAYEE for their respective interests in the plan at the time its benefits become payable" You cannot take it away from AP in the separate interest QDRO. However this seems a shared interest QDRO and not a separate interest QDRO. It is not clear from the extract of the language provided. And in this case she can be really out of luck. The relevant sections in this case to review would be the timing of payments section and death of relevant parties section.

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The Department of Labor is unreliable when it comes to QDROs.  The DOL also advises that a domestic relations order must specify the last known address of the alternate payee as one of the conditions for qualification.  Check that against the actual statutory requirement.

The information in the link that you provided does not address IRC 414(p)(5) and its implications, which is typical for the DOL because the DOL has very shallow thinking when it comes to QDROs.  I did not search the site for a discussion of issues relating to the post-QDRO death of the participant; maybe the DOL redeems itself elsehwhere.  ERISA has an identical provision to the IRC, so it is not a matter of differences in the statutes.  Both statutes also say that an order cannot make the plan pay something that the plan is not designed to pay.  When you add IRC 414(p) to the mix, it appears that a typical DB plan has two types of benefit:  a benefit that is payable if the benefit starts when the participant is alive (the retirement benefit, e.g. a single life annuity or QJSA), and a benefit that is paid after the participant dies (the death benefit).  When the death benefit is a QPSA (which is payable to a surviving spouse), IRC 414(p) says that the order can provide for the AP to be paid some specified portion of the death benefit (by treating the AP as a surviving spouse), but only if the order expressly includes terms to that effect.  There are court decisions that adopt this view, although it may not be articulated exactly this way.  I know of none that say that a separate interest includes the death benefit without the order mentioning it.

If an AP has a separate interest QDRO and there is not express language regarding the death benefit and the AP starts benefits before the participant dies, then the AP is getting the retirement benefit.  Once a benefit starts it is paid in accordance with its terms and the terms of most defined benefit plan benefits do not provide for a post-start modification because of the death of a person other than the annuitant.

Use of the term "separate interest" is dangerous because it does not have an accepted definition.  It is easy to presume too much is included in the term.  The presumptions can cause provisions such as IRC 414(p)(5) to be overlooked.  It is best to say what the AP gets under relevant circumstances (and the death of either of the AP and the participant are relevant in DB plans) and know the rules rather that rely on "separate interest" to express what is intended.  That might lead one to consider and describe what portion of the death benefit is appropriate for the AP.  Is the presumed portion the proportion of the death benefit that relates to the share of the regular pension benefit awarded to the AP?  Where does that presumption come from (maybe community property states have been influential)? Why is that the appropriate portion in each case? 

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paralegal231, if the New York City Employees Retirement System is a governmental plan not governed by the Employee Retirement Income Security Act of 1974, consider that some of the information above could be partially inapt.  Even if NYCERS provides some retirement or death benefits for a non-participant in ways somewhat similar to the provisions and procedures used for an ERISA-governed plan, there might be important differences.  You might want to learn more about the System's provisions and plan-administration rules and procedures, and about related New York State law and New York City law.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Peter Gulia's comments are correct.  Most provisions of IRC 414(p) do not apply to governmental plans and most governmental plans have applicable adopted rules and procedures for QDROs that have different twists.  The ERISA based court cases do not necessarily apply, either.  That said, many plans are modeled on section 414(p).

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