failure to name a beneficiary per marital settlement agreement

[Draper55]

profit sharing plan states that in the absence of a designated beneficiary, the spouse becomes the beneficiary and if no surviving spouse, then the children. Plan also states that an ex-spouse can take the spouse's place on death if so provided under a domestic relations order per.  In this case, the marital settlement agreement stated that the participant was to name the former spouse as beneficiary under the plan. The participant has died; but there is no executed beneficiary designation form effecting what the marital settlement agreement called for. There is no spouse at death, only the ex-spouse and children.  Does it matter that the deceased did not physically name the ex-spouse as beneficiary while alive or was the intent of the marital settlement agreement sufficient?  Any insights are appreciated.

[david rigby]

Is there a DRO that purports to be a QDRO?

 

[CuseFan]

If not, the ex-spouse should put the plan on notice and get one in the works asap.

[Peter Gulia]

Assuming an ERISA-governed plan, this seems an illustration of another situation in which the plan’s administrator is not responsible for the participant’s failure (but might, practically, be burdened by it).

David Rigby and CuseFan suggest one recognize that, even after the divorce and after the participant’s death, a court might issue a domestic-relations order. See 29 C.F.R. § 2530.206(c)(2) https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-D/part-2530/subpart-C/section-2530.206.

In responding to claims (if any), a plan’s administrator should be punctilious in following ERISA § 503’s and the plan’s claims procedures.

[CuseFan]

22 hours ago, Peter Gulia said:

punctilious

That has to be the word of the day! Thanks Peter.

[CuseFan]

22 hours ago, Peter Gulia said:

another situation in which the plan’s administrator is not responsible for the participant’s failure (but might, practically, be burdened by it)

and this is a very true statement that happens far too often

[QDROphile]

As in, Punctilious Pilot?

Captain Sully!

[fmsinc]

The Plan Administrator must pay the money in the account the children pursuant to its own rules saying that the money goes to the children.  Kari E.  Kennedy, Executrix v.  Plan Administrator for Dupont Savings and Investment Plan, 129 S.Ct. 865, 555 U.S. 285 (2009).  But read Andochick v. Byrd, 709 F.3d 296 (2013) dealing with post-distribution recovery by an intended beneficiary.  

However, under the Pension Protection Act of 2006 it is possible for the former spouse to return to the state court and seek a posthumous QDRO awarding the PSP proceed to her.

But a promise in an Agreement to name your former spouse as the beneficiary in not the equivalent to a transfer of retirement benefits to the former spouse that is enforceable under ERISA by use of a QDRO, so I have my doubts that the QDRO is an appropriate remedy.  A QDRO would effectively change the nature of the language of the Agreement.    

BUT the children were never the intended beneficiaries of the account at any time.  The former spouse was the intended beneficiary and since she cannot sue the Plan, she would have to sue her children as unintended beneficiaries under Andochick.  Perhaps she needs to sue her attorney for malpractice.  

A very thorough explanation of this entire issue is set forth at  Hennig v. DIDYK, Tex: Court of Appeals, 5th Dist., No. 05-13-00656-CV, (2014) - https://law.justia.com/cases/texas/fifth-court-of-appeals/2014/05-13-00656-cv.html

And the Plan Administrator should do nothing, or at the very most file an interpleader action and ask the court what to do with the money, and let the court figure it out. 

David 

[QDROphile]

Your first sentence and last sentence contradict. I would agree if you meant by the last sentence that the Plan Administrator should do nothing toward helping the former spouse understand or pursue whatever rights the former spouse has under the marital settlement agreement.

[Roycal]

"Perhaps she needs to sue her attorney for malpractice."  Absolutely, if there is enough money involved to endure litigation or settlement negotiations with the attorney.  This should never have happened (obviously). 

[AKowalski]

The plan should be administered according to its terms (and it should include terms that comply with the QDRO and claims procedure rules). If the plan is administered in accordance with its terms and its compliant QDRO and claims procedure rules and that results in the benefit being paid out to the children, who are the lawful beneficiaries under the terms of the plan, then the plan should have no liability, because any state law to the contrary would be preempted by ERISA. That said, given that the plan is on notice of this situation, it may have obligations to delay distribution under its QDRO and claims procedures while certain additional issues are sorted out. If a QDRO is actually submitted to the plan, then the QDRO could dictate the disposition of the benefit.

To be clear, a divorce decree is almost never a QDRO, and thus almost never has any direct impact on plan administration. The only thing the divorce decree does is put the plan administrator on notice that there might soon be a QDRO submitted to the plan. If it becomes clear that there will be no QDRO, then the divorce decree becomes meaningless from the plan's perspective. All you need to do to clear up this point is ask the ex-wife if she plans to submit a QDRO to the plan. 

After the benefit is distributed to the children, the ex-spouse will likely have a valid claim under state law against the children that is not preempted by ERISA (but not against the plan itself, assuming the plan complied with lawful QDRO and claims procedures). 

[Riley Britton]

On 10/21/2022 at 4:38 PM, fmsinc said:

The Plan Administrator must pay the money in the account the children pursuant to its own rules saying that the money goes to the children.  Kari E.  Kennedy, Executrix v.  Plan Administrator for Dupont Savings and Investment Plan, 129 S.Ct. 865, 555 U.S. 285 (2009).  But read Andochick v. Byrd, 709 F.3d 296 (2013) dealing with post-distribution recovery by an intended beneficiary.  

However, under the Pension Protection Act of 2006 it is possible for the former spouse to return to the state court and seek a posthumous QDRO awarding the PSP proceed to her.

But a promise in an Agreement to name your former spouse as the beneficiary in not the equivalent to a transfer of retirement benefits to the former spouse that is enforceable under ERISA by use of a QDRO, so I have my doubts that the QDRO is an appropriate remedy.  A QDRO would effectively change the nature of the language of the Agreement.    

BUT the children were never the intended beneficiaries of the account at any time.  The former spouse was the intended beneficiary and since she cannot sue the Plan, she would have to sue her children as unintended beneficiaries under Andochick.  Perhaps she needs to sue her attorney for malpractice.  

A very thorough explanation of this entire issue is set forth at  Hennig v. DIDYK, Tex: Court of Appeals, 5th Dist., No. 05-13-00656-CV, (2014) - https://law.justia.com/cases/texas/fifth-court-of-appeals/2014/05-13-00656-cv.html

And the Plan Administrator should do nothing, or at the very most file an interpleader action and ask the court what to do with the money, and let the court figure it out. 

David 

I knew the Kari Kennedy case would pop up here!  

[Luke Bailey]

The plan should consider interpleading.

If the plan pays the children, the ex-spouse should consider an action in state court to impose a constructive trust on the funds to enforce the agreement in the dissolution.