If a Participant has already begun to receive annuity payments under a

[Guest Quinn]

If a Participant has already begun to receive annuity payments under a joint and survivor annuity, with his former wife as the joint annuitant, can a QDRO remove his wife as the joint annuitant? If it does, is it really considered to be "qualified," since one of the requirements of a QDRO is that it must "create or recognize the existence of an alternate payee's right to, or assigns to alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan...?" In this case it would not create or recognize the former spouse's right to the annuity but would take it away. Is this the correct interpretation? Is there any authority (Regulation, Bulletin, etc.) that interprets this type of situation?

[Guest]

You're right that a QDRO is necessary to give someone other than the participant an interest in the pension benefit. The QDRO is an exception to the general rule that pension rights can't be assigned or alienated. Here, the order doesn't assign or alienate the participant's rights, so you never need to get to the question of whether the DRO is qualified. Bottom line, I don't think there's any problem in honoring the DRO, regardless of whether it's a QDRO or not.

[pjkoehler]

Couple comments: first, for many sound reasons in reaching a community property settlement, the parties may stipulate to what is often called a "zero-dollar QDRO," i.e. a QDRO designed to recognize that the nonemployee spouse/alternate payee has no interest in the pension benefits of the employee spouse. This makes sense where the nonemployee spouse has bargained away his/her claim to a share of the community property portion of the benefits. This is just good lawyering by the family law attorney representing the employee spouse. If the employee spouse doesn't obtain this, then s/he is always at risk that a court in the future will grant the nonemployee spouse a QDRO assigning some portion of the benefits, the agreement notwithstanding.

Second, the QDRO you mention appears to affect a pension benefit in pay status, i.e. the J&S annuity. You could probably take the position that the plan doesn't permit participants to modify the terms of a benefit in pay status, therefore such an order is not a QDRO since it requires the plan to pay a benefit that is inconsistent with the terms of the plan. If this is a purchased annuity, it's highly unlikely the insurer will permit the conversion of the benefit to some other form.

[QDROphile]

I support the second paragraph of PJK's response. You don't want to mess with the J&S benefits in place, even if this time the participant and alternate payee would like the result. The order is not qualified. Next time you will have an order from a former spouse from before the particpant remarried and started a J&S with the new spouse. You will really wish you had taken the better stand this time.

And if you don't like what PJK suggested, your plan document had better allow a post start date revision of the distribution option, which it doesn't because (among other reasons) you would open the door to adverse selection.

There is a wrongly decided case that says that a QDRO cannot invade the contingent annuitant's benefit after the J&S starts. I think the name is Hopkins v. AT&T. The circumstances are not quite the same and that is not the basis for PJK's response.

And PJK is correct about what would happen if the annuity had been purchased and distributed. It would not be a QDRO issue for the plan and the order wouldn't be a QDRO at all.

[david rigby]

Non-lawyer opinion: a benefit in pay status cannot be changed by anybody (retiree, spouse, plan sponsor, court, etc.), unless specifically authorized by the plan. Most plans would not want to include such a provision, as correctly suggested by QDROphile, due to adverse selection.

I believe that the proposed change to a J&S benefit is contrary to the original intent of ERISA.

The only situation I have ever encountered where the form of benefit was changed was a plan termination, with the plan being amended to permit the retiree (with proper spousal consent) a one-time option to elect a lump sum payment. If the retiree declined the election, then the plan would purchase an annuity to provide the balance of the promised annuity payments.

[Guest Quinn]

I posted the original question about the QDRO issue. I am an attorney working for an insurance company and it is our policy and stated in our contracts and certificates that annuity form selections are irrevocable after payments have begun. However, I wanted to see if there was any authority that would require us to remove the wife as the joint annuitant, if a court ordered required it, even if the certificate and contract and even the plan, do not allow such an action. My thoughts were that this would not be considered a QDRO since it would extinguish her rights to the Annuitant's pension not create any rights to the benefit. I thought this was the intent of REA and ERISA-to protect the former spouse's rights. Does anyone have any furhter thoughts? I appreciate all the previous suggestions.

[QDROphile]

Code section 414(p)(3)(A) and the ERISA equivalent state that a domestic relations order does not meet the requirements for qualification if requires "a plan to provide any type or form of benefit, or any option, not otherwise provided under the plan." Your plan does not provide the option to change a J&S benefit after the annuity starts. That is the basis for all the comments above.