Marital Status & Beneficiary Update - without QDRO

[George Ross]

Hi QDRO Specialists,

In a divorce situation, both parties established 401(K) with new employers after the date of separation (in CA). These 401(K)s are separate properties belonging to each party but opened with marital status as 'Married'. Is a QDRO needed to update marital status and beneficiary post-divorce?

QRDO is needed to divide community property 401(K). But in a situation where both parties decide to retain their respective 401(K) and forever waive rights to this community property (similar amounts), is a QDRO needed to update marital status and beneficiary post-divorce? i.e. Is QDRO needed to waive these rights?

Finally, is it correct to assume that QDRO doesn't apply to IRA rollover and Roth IRA accounts?

Thanks for your comments.

George

[fmsinc]

In Kari E.  Kennedy, Executrix v.  Plan Administrator for Dupont Savings and Investment Plan, 129 S.Ct. 865 (2009) which you can find at -
https://scholar.google.com/scholar_case?case=16253581861885772265&q=KENNEDY+V.+DUPONT&hl=en&lr=lang_en&as_sdt=20003&as_vis=1

the Supreme Court of the United States held that you don't need a QDRO to waive an interest in a Plan, but that, in fact: 

"In fact, a beneficiary seeking only to relinquish her right to benefits cannot do this by a QDRO, for a QDRO by definition requires that it be the "creat[ion] or recogni[tion of] the existence of an alternate payee's right to, or assign[ment] to an alternate payee [of] the right to, receive all or a portion of the benefits payable with respect to a participant under a plan." 29 U.S.C. § 1056(d)(3)(B)(i)(I). There is no QDRO for a simple waiver...."

So the waiver you seek should be set forth in the Marital Settlement Agreement, and in your case, it wouldn't hurt if the Judgment of Absolute Divorce contained language that would provide the Plan Administrators with something to put in their files to show such a waiver if needed for the unique laws of California re: community property.  If the JAD doesn't contain that language, just furnish a certified copy to the Plan Administrators, explain the situation and ask if they need anything else.  

Normally any ERISA entitlements that one party has in the pension or retirement benefits of a Plan Participant die with the marriage unless preserved in a QDRO, or unless a party has retired prior to divorce and the Alternate Payee's survivor benefit rights have been confirmed.  See Hopkins v. AT&T Global Information Solutions Co., 105 F.3d 153 (4th Cir. 1997)

A "QDRO" is not required for a transfer of IRA funds since IRA are not a Plan under ERISA.  The proper name is a "Retirement Benefits Order", but most (but not all) IRA custodians feel that NO Court Order is required.  The are satisfied if  the parties fill our their forms and provide a copy of the JAD and the MSA.  But be careful, some states, including Maryland, do not authorize a transfer of retirement account balances except in connection with and incident to a divorce or annulment.  Just because Federal law permits a transfer to a "spouse or former spouse" (IRC 401(d)(6)) does not mean that the court has the jurisdiction to do so.  The tax and penalty risks if a transfer is made without proper jurisdiction are all on the IRA account holder.  So check your state law.

David Goldberg  

[George Ross]

Hi David,

Thank you very much for your clear and detailed response - greatly appreciate the help.

Regards,

George