Death of Alternate Payee

[Thornton]

I have a situation that I have not encounted before. A couple's divorce was final on July 16, 2019. I am retained in August by the attorneys to draft two QDROs, one for a cash balance pension plan and one for a 401(k) plan. All parties approve draft QDROs by late September and they are submitted for pre-approval to the plan sponsor on October 9. The plan administrator acknowledges receipt and freezes the participant's accounts, but wants several changes to both QDROs which are made and both are resubmitted on October 22. On November 27, the plan administrator pre-approves the 401(k) but wants one revision to the pension QDRO, which it did not mention in the first revision request. I'm used to this, so I made the minor revision and resubmitted the pension QDRO today. 

Meanwhile, the Alternate Payee dies on November 26th! Both QDROs have language covering this contingency. Because of the alternate payee's health, signature pages were signed the by both the participant and alternate payee when they approved the drafts in September, but before submission to the plan administrator for pre-approval. Since pre-approval is not complete, the QDROs have not been submitted to the court yet. Of course, the alternate payee does not have a beneficiary form filed with the plan sponsor.

1. Are the signature pages valid? I would prefer to revise the pages to reflect the personal representive of estate's signature. I guess it's up to the attorneys since they are filing them, but thought I'd ask.

2. Should the plan sponsor be made aware of the death of the alternate payee before the court signed QDROs are submitted for payment? 

3. Does anyone have advice/thought in this situation?

Thanks.

[fmsinc]

On the death of the Alternate Payee the defined benefit plan would become a non-issue unless the Plan and the Agreement of the parties or the JAD permitted the Alternate Payee to pass her share of the Participant's retirement annuity to her estate similar to what can be accomplished in FERS and CSRS per 5 CFR 838.237 that you can find at https://www.law.cornell.edu/cfr/text/5/838.237

As far as the 401(k) Plan is concerned the Pension Protection Act of 2006 provides for the possibility of a post mortem QDRO, so the death of the Alternate Payee would make no difference.  But I would be hesitant to use her signature.  I would ask the court to enter the QDRO without her signature, or with the signature of her Executor/Personal Representative.  There are also a number of cases that address the issues by the use of a nunc pro tunc QDRO.  Yale-New Haven Hospital v. Nicholls, 788 F.3d 79, 85 (2d Cir. 2015) where the Court held that two nunc pro tunc Orders issued after the death of the Participant were valid QDROs.  Said the Court: 

        “Domestic relations orders entered after the death of the plan participant can be QDROs. In the Pension Protection Act of 2006, Congress made clear that a QDRO will not fail solely because of the time at which it is issued, see Pub. L. No. 109-280, § 1001, 120 Stat. 780 (2006), although several of our sister circuits had already reached that conclusion, see, e.g., Files v. Exxon Mobil Pension Plan, 428 F.3d 478, 490-91 (3d Cir. 2005) (finding that a posthumous order constituted a QDRO), cert. denied, 547 U.S. 1160 (2006); Patton v. Denver Post Corp., 326 F.3d 1148, 1153-54 (10th Cir. 2003) (same); Hogan v. Raytheon Co., 302 F.3d 854, 857 (8th Cir. 2002) (same); Trs. of Dirs. Guild of Am.-Producer Pension Benefits Plans v. Tise, 234 F.3d 415, 421-23 (9th Cir. 2000) (same).”

I have a number other citations on this issue that I can furnish you if you need them. Let me know. 
 

In many states, including Maryland, a QDRO is merely an enforcement tool like a garnishment or an attachment designed to implement another court order, i.e. the JAD (incorporating the Agreement).  What follows is from a Memo on the subject: 

Neither Maryland or Federal law requires that both parties or their respective counsel consent to the entry of a Qualified Domestic Relations Order (or other similar Court orders for non ERISA Plans).  See Rohrbeck v. Rohrbeck, 318 Md. 28, 566 A.2d 767 (1989), where the Court of Appeals recognized the use of appropriate pension orders as an enforcement tool.  The Court held that,

        "As is evident from this discussion, the QDRO has become an order of high significance in State domestic relations practice. An attempt to cause pension plan benefits payable to one party to be paid to an alternate payee, whether through an attachment in aid of a support obligation or pursuant to the Marital Property Disposition Act (Md. Fam.Law Code Ann. § 8-205) can succeed only through the mechanism of a QDRO. See Fox Valley & Vicinity Const. Workers v. Brown, 879 F.2d 249, 252 (7th Cir.1989): "[E]RISA preempts any attempt to alienate or assign benefits by a domestic relations order if that order is not a QDRO." See also Cummings Techmeier v. Briggs & Stratton, 797 F.2d 383 (7th Cir.1986). Absent such a qualified order, not only will the pension plan administrator refuse to implement the court's decision, but, given the anti-alienation provisions extant in both the labor and tax codes, coupled with the preemption provision of ERISA § 514 (29 U.S.C. § 1144), there is at least a reasonable argument that a non-qualified order may be invalid even as between the parties."
        * * * *
        ". . . .we therefore expressly recognize the ability of a party otherwise entitled to a QDRO to obtain one as an aid to enforcing a previously entered judgment." (Emphasis supplied.)

    A Qualified Domestic Relations Order? is in the same category as an attachment, garnishment or other enforcement mechanism found in the Maryland Rules, including, for example, a writ of execution, charging order, or sequestration, and does not require the approval of the party against whom such Order is sought.  It is nonsensical to suggest that to be the case.  How easy it would be for an unhappy litigant to frustrate the intent of the parties in an Agreement, or of the Court in it's JAD, by simply refusing to sign off on the QDRO.   

    Delays in the entry of a QDRO can be fatal if, for example, the Participant in a 401(k) or TSP terminates his/her employment and withdraws all of the money in such an account. Or if the Participant dies without an Order in place and (in non ERISA cases where a post mortem or nunc pro tunc Order cannot be obtained pursuant to the Pension Protection Act of 2006, or in the case of the Maryland State Retirement and Pension System per Robinette v. Hunsecker, 439 Md. 243?, 96 A.3d 94 (2014)), the Alternate Payee/Former Spouse will receive nothing.  Or if the Participant in an ERISA qualified Plan remarries and retires before a QDRO is in place, thereby permanently divesting the Alternate Payee from survivor annuity benefits (per Hopkins v. AT&T Global Information Solutions Co., 105 F.3d 153 (4th Cir. 1997)). 

    As for the Federal view, see this DOL pamphlet attached, and you can find it at  -
https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/qdros.pdf -  Go to Question 1.2, 6th paragraph on page 15 where it says, 
        "There is no requirement that both parties to a marital proceeding sign or otherwise endorse or approve an order."

[ERISA §§ 206(d)(3)(B)(ii), 514(a), 514(b)(7); IRC § 414(p)(1)(B)]

    See also Engel v. Sambrana, No. 1886, September Term, 2012 (unreported) affirming the Rohrbeck case. 
    Even if the view that both parties need to sign the QDRO is correct, see Marquis v. Marquis, 175 Md.App. 734, 931 A.2d 1164 (2007), where the husband was held in contempt by the trial court for his refusal to sign the proposed Constituted Pension Order dividing his Military pension.  And there was nothing to prevent a Court from appointing a "trustee" to sign the QDRO on behalf of the husband.

Hope this helps. 

David

[Thornton]

Thank you David! This helps! In this case both plans are DC and the DROs were filed for pre-approval prior to the Alternate Payee's death. While revisions were required by the PA, during which AP died, a hold was placed on the participant's accounts. We should be ok. Based on your comments, I will suggest to the attorneys that they not use her signature.