Death of Spouse- No QDRO Filed

[mal]

How do your plans handle the situation in which a divorce decree grants an ex-spouse an interest in retirement benefits, but the ex-spouse dies before a QDRO is filed with the Plan? In this case, the participant is nowhere close to retirement age. It seems the estate should be put on notice and given a time frame to file a posthumous QDRO, but would appreciate thoughts.

[QDROphile]

How is it that you come to ask this question? From what perspective: plan, participant, former spouse (estate)? The plan should do as little as possible with respect to anything other than processing the receipt of a domestic relations order in accordance with it's written QDRO procedures (which reflect and are compliant with the law). If the written QDRO procedures provide for the plan to do more than that, shame on the plan. There are some things the estate can do within the framework of the law to assure time to present a QDRO-worthy domestic relations order, if it can get one from the state court, and the QDRO administrator can cooperate within the minimalist approach described in the second sentence.

[CuseFan]

Not relevant to the question, but I find this very interesting in that I always hear about posthumous QDROs being filed after the participant has died rather than the ex-spouse/potential alternate payee. Curious how often you all have seen this.

[mal]

2 hours ago, QDROphile said:

How is it that you come to ask this question? From what perspective: plan, participant, former spouse (estate)? The plan should do as little as possible with respect to anything other than processing the receipt of a domestic relations order in accordance with it's written QDRO procedures (which reflect and are compliant with the law). If the written QDRO procedures provide for the plan to do more than that, shame on the plan. There are some things the estate can do within the framework of the law to assure time to present a QDRO-worthy domestic relations order, if it can get one from the state court, and the QDRO administrator can cooperate within the minimalist approach described in the second sentence.

Plan perspective. The Plan has received a divorce decree and property settlement agreement that awards the ex-spouse an interest in the Plan, but the parties did not submit a QDRO. The property settlement agreement will not meet the legal requirements of a QDRO, but the administrator has notice that the parties intended to assign a portion of the participant's benefit. 

[fmsinc]

What kind of Plan, defined contribution or defined benefit.

Pursuant to what law, ERISA, US Military, CSRS, FERS and other Plans administered by OPM, State, County or Municipal Plan,  Union Plan, Church Plan, International Plan.  

Did the Court specifically award survivor annuity benefits.  

Is this matter pending in a case where if the court does not specifically award survivor annuity benefits the former spouse will not receive them....period, full stop?   Like Maryland per the 2002 Potts v. Potts case.

If you are referring to an ERISA qualified defined benefit plan and if survivor annuity benefits are subsumed into whatever language is in the Judgment of Divorce, then you are in luck.   See my attached Memo that gives you two avenues of attack, the Pension Protection Act of 2006 that permits the post-mortem/posthumous entry of a QDRO, and the concept of "nunc pro tunc".

Some states have permitted posthumous EDROs with respect to State pension plans that are not ERISA qualified. 

Post Morten and Nunc Pro Tunc Memo.pdf

David 

 

[Peter Gulia]

If a might-be domestic-relations order is submitted, a plan’s administrator might evaluate whether the order’s would-be payee is an alternate payee within the meaning of ERISA § 206(d)(3)(K).

I am unaware of any Federal court precedent that holds for or against treating a deceased nonparticipant former spouse’s executor or similar personal representative as an alternate payee within the meaning of ERISA § 206(d)(3)(K).

[QDROphile]

mal:

Assuming that the plan is an ERISA plan (and if a DC or DB plan makes a difference in various details), the plan might consider acknowledging that the plan has received a domestic relations order in accordance with its assumed appropriate QDRO procedures (because the divorce decree IS a DRO) and notify the parties that it has determined that the DRO does not meet the requirements for qualification. The notice should then explain what the plan will do next, based on its determination that the order is not qualified. Because I do not know what "your" plan does next after a negative determination, it is difficult to suggest what to do next within the plan's framework. However, as a matter of my interpretation of the law and preferred principles, the plan should explain that the benefit is "suspended" (I will leave what that means to the plan) for a reasonable time to allow the submission of a domestic relations order that purports to meet the requirements for qualification. That puts the former spouse (estate) in a position with reasonable time to capture whatever is actually available under 1) state law - and there may be nothing for the deceased former spouse, and 2) federal law - yes, posthumous QDROs are possible but the devil is in the details, especially under DB plans. And shame on the Department of Labor for its completely useless efforts to comply with the Congressional mandate to provide guidance concerning posthumous QDROs, especially for DB plans. When the new DRO is submitted, it will be evaluated, and then either qualified or not. Keep in mind at that point the qualification requirement that the plan cannot be required to provide an amount or benefit that the plan was not designed to provide. Honi soit qui mal y pense.

[Adi]

1 hour ago, QDROphile said:

mal:

Assuming that the plan is an ERISA plan (and if a DC or DB plan makes a difference in various details), the plan might consider acknowledging that the plan has received a domestic relations order in accordance with its assumed appropriate QDRO procedures (because the divorce decree IS a DRO) and notify the parties that it has determined that the DRO does not meet the requirements for qualification. The notice should then explain what the plan will do next, based on its determination that the order is not qualified. Because I do not know what "your" plan does next after a negative determination, it is difficult to suggest what to do next within the plan's framework. However, as a matter of my interpretation of the law and preferred principles, the plan should explain that the benefit is "suspended" (I will leave what that means to the plan) for a reasonable time to allow the submission of a domestic relations order that purports to meet the requirements for qualification. That puts the former spouse (estate) in a position with reasonable time to capture whatever is actually available under 1) state law - and there may be nothing for the deceased former spouse, and 2) federal law - yes, posthumous QDROs are possible but the devil is in the details, especially under DB plans. And shame on the Department of Labor for its completely useless efforts to comply with the Congressional mandate to provide guidance concerning posthumous QDROs, especially for DB plans. When the new DRO is submitted, it will be evaluated, and then either qualified or not. Keep in mind at that point the qualification requirement that the plan cannot be required to provide an amount or benefit that the plan was not designed to provide. Honi soit qui mal y pense.

This is the approach I typically take (evaluate, suspend/hold benefits, and give the estate a period of time to submit a QDRO on behalf of the deceased ex-spouse). Even if the plan is within its rights to pay out benefits to the participant or another individual and ignore the divorce decree, I'd be wary of a state court stepping in and taking issue with the plan for not suspending benefits when it had notice of the potential assignment. I've seen this situation come up half a dozen times or so--rare but not nonexistent. 

[Luke Bailey]

 

14 hours ago, mal said:

How do your plans handle the situation in which a divorce decree grants an ex-spouse an interest in retirement benefits, but the ex-spouse dies before a QDRO is filed with the Plan? In this case, the participant is nowhere close to retirement age. It seems the estate should be put on notice and given a time frame to file a posthumous QDRO, but would appreciate thoughts.

mal, your facts seem to indicated that the plan administrator is familiar with the terms of the divorce decree, but has not yet received a DRO. I think it is the estate's responsibility to understand the implications of the decedent's divorce decree to the decedent's estate, since the divorce decree and related property settlement is an asset of the estate.

As I understand your question, the participant and his or her now deceased ex-spouse had a divorce action, and a court approved a property settlement that may contemplate a QDRO for the ex-spouse, but the plan has not yet received a DRO. Until the plan receives a DRO, you're just speculating. Perhaps the originally contemplated DRO contemplated a contingent alternate payee, e.g. a child or children of the couple. In that case, If the deceased putative alternate payee's attorney pursues a DRO, presumably that attorney would now simply make the person or persons who would have been the participant's ex-spouse's contingent alternate payee(s) the alternate payee(s).

If a contingent alternate payee would not have made sense given the family's situation, then perhaps you will never get a DRO. This will be subject to state law and the demographics of the former couple's marriage. If the participant wants to oppose the issuance of a DRO now for a reason linked to his or her ex-spouse's death, it will be up to the participant's attorney to make a case that the DRO requested by the deceased alternate payee's attorney, or by an attorney for the ex-spouse's child or children, should not be approved by the court.

If a DRO approved by the state court does ultimately come the plan's way, the plan will need to analyze it for ERISA compliance. Generally, if the alternate payee is a permitted person (e.g., a child, but there could be others) for a QDRO, you should be able to apply your normal QDRO process.

There could be difficult issues if this is a DC plan and a separate interest QDRO was contemplated, since generally in that situation, had the alternate payee survived, he or she might have had the ability to name anyone he or she wanted as the beneficiary for her segregated account. I don't think there is much in the way of guidance or precedent for some of the potential situations, so again, I would let the parties first hash things out in state court.

[mal]

Thanks for the replies. The Plan's QDRO Procedures provide for an 18-month administrative hold period to allow the AP to seek a QDRO. I think the plan is to put the estate on notice that no QDRO has been presented and to give them 18 months to seek an order. It will be interesting to see if they produce a nunc pro tunc QDRO, or just let it go. The only potential alternate payee shown in the original property settlement agreement was the deceased spouse, not any children.

[fmsinc]

I misread the question.  I took it to mean that the participant had died, in which event the PPA of 2006 will enable a posthumous QDRO to be submitted and qualified.  But Peter Gulia is correct that the estate of the Alternate Payee who predeceases the Participant is not "Alternate Payee" per ERISA § 206(d)(3)(K). A survivor annuity is only payable to an Alternate Payee who survives the Participant's death - be definition.  This is not the situation addressed in the discussion on April 11, 2019. 

See

.  

[Peter Gulia]

Thank you for the vote of confidence, but I didn’t state a view. Rather, I said:

“I am unaware of any Federal court precedent that holds for or against treating a deceased nonparticipant former spouse’s executor or similar personal representative as an alternate payee within the meaning of ERISA § 206(d)(3)(K).”

At least one State court reasoned that an order can be a QDRO only if it restricts its alternate payee—including a successor-in-interest to an original alternate payee—to a spouse, former spouse, child, or other dependent of the participant. In re Marriage of Janet D. & Gene T. Shelstead, 66 Cal. App. 4th 893, 78 Cal. Rptr. 2d 365, 22 Empl. Benefits Cas. (BL) 1906 (Cal. Ct. App. [4th App. Dist., Div. 1] Sept. 15, 1998) (interpreting ERISA § 206(d)(3), and applying ERISA § 206(d)(3)(K)).

But a State court’s decision is no precedent that constrains a Federal court’s interpretation of ERISA § 206. If an order is submitted, an ERISA-governed plan’s administrator decides whether the order is a domestic relations order and whether it is a qualified domestic relations order. If a plan’s administrator denies QDRO treatment and a disappointed person challenges that decision, the administrator could insist that litigation proceed in Federal court.

More than 39 years after enactment, many questions about the import of ERISA § 206(d)(3) remain undecided.

[david rigby]

By the way, notice in the April 2019 discussion, linked by @fmsinc above, the original post uses the term "retirement account", with no mention of whether it is a qualified plan or an IRA.