Annulment

[Stash026]

Am I right in assuming that no QDRO is necessary in the case of an annulment (since it's like the two were never married)?  Our client is questioning the documentation, which states that there was an annulment and not a divorce.

Thanks in advance!

[CuseFan]

QDRO necessary for what? A QDRO is an optional legal division of retirement plan benefits. Even in a divorce a QDRO is not a given. If you aren't splitting benefits between two parties here, there is no reason for a QDRO. If you are, or the parties want to, then you need a QDRO. 

[QDROphile]

“questioning the documentation”

Is the concern about a plan administrator recognizing that the participant is not married, and therefore not subject to whatever spouse consent or J&S annuity benefit that might otherwise apply, especially since original records may indicate marriage?

CuseFan is essentially correct about QDROs, but sometimes plan administrators are not well-informed and QDRO is (incorrectly) the only concept or language available to them in unusual circumstances. There are discussions on this Board about use of a technically incorrect “QDRO” to assure that a former spouse has no interest under the plan.  

[david rigby]

Note that IRC 414(p)(1)(B)(i) states, "... relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant …"

Presumably, it's up to the court to determine if "other dependent" is relevant.  If there is property in question, perhaps this could be the basis for a DRO.  Just wonderin'.

[MoJo]

3 hours ago, Stash026 said:

... (since it's like the two were never married)?  Our client is questioning the documentation, which states that there was an annulment and not a divorce.

41 minutes ago, david rigby said:

Note that IRC 414(p)(1)(B)(i) states, "...  …"

Presumably, it's up to the court to determine if "other dependent" is relevant.  If there is property in question, perhaps this could be the basis for a DRO.  Just wonderin'.

 

Keep in mind in most jurisdictions, and annulment can only be obtained when the marriage itself wasn't valid (bigamy, fraud, mental incapacity) an dis designed to have an exit from that "relationship" separating the parties and their property.  As pointed out in the above second quote - it's up to a court to determine who is entitled to what - and a DRO can be issued if necessary to separate equitably assets commingled - or for whatever reason valid under state law in the jurisdiction in question.  Just because the marriage "never existed" doesn't mean there isn't a need to separate assets - and a DRO may be a valid way to do that.

[jpod]

Let's assume a judge decides that the non-participant is entitled to a share of the participant's plan benefits in connection with the annulment.  I can't imagine how that could happen, but that seems to be the assumption here (otherwise why are we talking about it).  Absent a court decision or IRS/DOL guidance on point, is it not an open question as to whether the non-participant could be an alternate payee if there was an annulment? 

[Peter Gulia]

In nonrule guidance, the Labor department stated a view that a plan’s administrator need not question a domestic-relations court’s description of a person as the participant’s former spouse, even if the same court in the same proceeding decided that there was no marriage.

 

ERISA Adv. Op. 92-17A (Aug. 21, 1992)

https://www.dol.gov/sites/default/files/ebsa/employers-and-advisers/guidance/advisory-opinions/1992-17a.pdf

 

If there is a proceeding about whether a plan’s administrator met or breached its responsibility to administer the plan, a court need not defer to (and might not be persuaded by) that interpretation.

 

In addition to other steps in evaluating whether an order is a QDRO, a plan’s administrator might evaluate whether the order “relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant[.]”  ERISA § 206(d)(3)(B)(ii)(I).

 

Please understand that I don’t express a view in either direction.

 

[jpod]

I guess it is NOT an open question.  Thanks for pulling that AO.

[MoJo]

15 hours ago, jpod said:

Let's assume a judge decides that the non-participant is entitled to a share of the participant's plan benefits in connection with the annulment.  I can't imagine how that could happen, but that seems to be the assumption here (otherwise why are we talking about it).  Absent a court decision or IRS/DOL guidance on point, is it not an open question as to whether the non-participant could be an alternate payee if there was an annulment? 

I'm confused.  An alternate payee is one a state court determines an alternate payee is under state domestic relations law.  As long as it is a valid court order from a court with proper jurisdiction, the plan administrator need not question is.

We tend to get hung up on the belief that an annulment "erases" history.  It does not.  It is a determination that the "legal" marriage was invalid, but the courts have amble "equitable" powers to still split property as may be appropriate.  The fact that they commingled assets in a marriage later annulled has to be dealt with - and if a state's domestic relations law says a split of property is appropriate - I don't see why a DRO can't be issued.

[jpod]

After seeing the AO which FGC circulated I agree.  Sorry for causing confusion.

[fmsinc]

Allow me to comment.  In my state, Maryland, the court has the power to make a monetary award (including the allocation of pension and retirement assets) at the time of absolute divorce or annulment.   An annulment can relate to a situation where the marriage was void ab initio (one party still married to someone else), or when the marriage is merely voidable (fraud).  But in Maryland the reason for the annulment doesn't matter.  

So the first question is what is the applicable law in your state?  If it permits the court to divide pension and retirement assets at the time of an annulment, then a QDRO can be entered by the court and will not be refused by the Plan Administrator who has no power to look behind the QDRO to the underlying state law.    

The QDRO is not automatic.   But the court has to enter the QDRO based on the request of the prospective Alternate Payee.  It must be requested in the pleadings and granted by the Court at a contested hearing, or the parties must agree upon it in their Marital Settlement Agreement.  In all event a certified copy of the QDRO will be sent to the Plan Administrator and it will be implemented.     

If the annulment has been entered and there is nothing in the court's order about a transfer of pension or retirement assets, then the matter is closed and further litigation would be barred by concepts of res judicata or collateral estoppel.    

[jpod]

I guess I had been assuming that an annulment always means the marriage was void ab initio, in which case the non-participant was never the "spouse," but now I've learned something.  I have also learned from the AO provided by FGC that as far as the DOL is concerned the PA can rely on the state court's determination that the non-participant was a spouse.

[Peter Gulia]

Some administrators' QDRO procedures give the participant and each proposed alternate payee an opportunity to submit whatever information one wants the administrator to consider in evaluating whether an order submitted for treatment as a QDRO is a QDRO.

In an ERISA litigation, some judges use a litigant's failure to present an argument at an administrative stage as support for dismissing a complaint.

And if an argument is presented and the administrator renders a reasoned decision, a Federal court often defers to an administrator's decision (unless it was an abuse of discretion).

[jmader]

This issue was addressed in DOL Advisory Opinion 92-17A which concluded that an annulled marriage may be the basis for an award under a QDRO if provided by state law.

With respect to your submission, you have represented that the Order assigns to former spouse Y, as “alternate payee,” 50% of participant X's accrued benefit under the Plan, and designates Y as the “surviving spouse” of X. Further, you indicate that Michigan domestic relations law provides for such a division of property upon the annulment of a marriage. Accordingly, it is the view of the Department that, to the extent the Order was executed by a court of competent jurisdiction pursuant to Michigan domestic relations law, neither the determination under the Order that Y is a “former spouse,” and thus meets the requirements to be an “alternate payee” for purposes of section 206(d)(3)(B) of ERISA, nor the determination that Y is a “surviving spouse” for purposes of section 206(d)(3)(F) of ERISA, are required to be reviewed by the plan administrator.