Benefit Payable when no QDRO was written

[ConnieStorer]

I have a somewhat unusual situation.  We have a defined benefit plan that was frozen back in 2017.  The Plan Sponsor recently amended the Plan to allow for lump sum payments.  We had a terminated vested participant who just passed away.  The only death benefit was the QPSA for married participants.  This individual was divorced (I believe back in 2020).

The Plan sponsor received a copy of the divorce settlement from the ex-wife after the Participant died.  The divorce settlement stated that the full benefit from the defined benefit plan was payable to the spouse.  No QDRO was ever written.

The Plan Document is an FIS Cycle 3 Document with the following language:

5.22 QUALIFIED DOMESTIC RELATIONS ORDERS
All rights and benefits, including elections, provided to a Participant in this Plan shall be subject to the rights afforded to any Alternate Payee under a "qualified domestic relations order." Furthermore, a distribution to an Alternate Payee shall be permitted if such distribution is authorized by a "qualified domestic relations order," even if the affected Participant has not reached the "earliest retirement age." For the purposes of this Section, "qualified domestic relations order" and "earliest retirement age" shall have the meanings set forth under Code §414(p).
A domestic relations order that otherwise satisfies the requirements for a "qualified domestic relations order" will not fail to be a "qualified domestic relations order": (i) solely because the order is issued after, or revises, another "qualified domestic relations order"; or (ii) solely because of the time at which the order is issued, including issuance after the Annuity Starting Date or after the Participant's death.

We told the ex-wife that she needs a QDRO before any payment can be made.  However, there is some disagreement in our office as to whether or not there are any benefits payable to the ex.  My arguement is that the Participant died prior to the request for any payments to begin.  He had attained Early Retirment Age but was a few years from Normal Retirement Age.  As an unmarried Participant, there is no death benefit so the ex is not entitled to any benefit.

Another administrator in the office thinks that if a QDRO is written, then the death of the participant should not affect the payment available to the ex since she was the Alternate Payee and entitled to 100% of the benefit.   

I still think any benefit payable to the ex is contingent on the Participant being alive at the time an election is made.

The Plan Sponsor has no problem with paying the benefit to the ex if she can get a QDRO issued.

Any thoughts out there on the benefit payable in this situation?

[Peter Gulia]

Unless the pension plan defines a QDRO more generously than ERISA § 206(d)(3) requires, the plan’s administrator might consider (and get its lawyer’s and actuary’s advice on) the QDRO regime’s general principle that a QDRO does not provide a benefit the plan does not otherwise provide.

If the plan’s only death benefit is (or was at the relevant time) a QPSA for a participant’s surviving spouse, what benefit could a court’s order attempt to provide to a participant’s former spouse who was not the participant’s spouse (or deemed surviving spouse) when the participant died?

This is not advice to anyone.

[david rigby]

I agree with @Peter Gulia.  In addition, the PA should consider whether ANY communication from the ex-wife might be considered a claim.  If so, that would enable the PA / Administrative Committee to determine NOW whether a benefit is payable to the ex-wife.  In the alternative, the plan might tell the ex-wife to get a QDRO, only to later conclude there is no benefit payable; this alternative means the ex-wife bears the legal cost for no ultimate value.  The PA will have to make the determination either way, so I suggest it's better to do it now.

[QDROphile]

This is another opportunity to rant about the abject failure of the Department of Labor to provide helpful guidance concerning post-death QDROs despite being directed to do so. Done.

I do not understand when the participant terminated relative to the divorce judgment, which contains the award of the participant’s entire benefit. Also, the award language could be better. However, I don’t think it makes any difference. The former spouse was awarded the participant’s entire benefit, not the participant‘s death benefit. The participant was alive when this happened. Pre-QDRO death after a pre-death award in the divorce judgment should not change anything.*  When a qualifying DRO is submitted, the alternate payee should receive a benefit in whatever form the participant could receive if the participant started benefits before death (actuarially adjusted for the AP). I do not address whether or not that includes the new lump sum benefit. Otherwise, a pension plan with only a QPSA would defeat QDROs whenever a participant dies before benefits start to the AP, and that cannot be what was intended under the law.

*I am troubled by opportunities for adverse selection, but explanation of that concern will have to wait until another day. However, I will repeat that this is an area where the Department of Labor was directed to provide guidance and it did essentially nothing in the regulations that it issued. Done again.

BTW, if the former spouse “gave” to the plan a copy of the divorce judgement that included terms of the pension plan settlement, that is a domestic relations order. Processing that order, even though the order will not qualify, provides the plan an opportunity to follow david rigby’s practical advice to inform the former spouse about its conclusion concerning the availability of any benefit whether or not a subsequent domestic relations order that covers the formal requirements for qualification is submitted.

[QDROphile]

Please disregard the second paragraph of my response above. I am rethinking the matter. As the award language stands now, I am in line with the idea that the former spouse receives nothing. The question is whether or not a post-death order in this case can remedy the omission of a pre-death provision that the alternate payee is to be treated as a spouse. And I am doubling down on my criticism of the DOL.

[fmsinc]

1.  I don't understand why the Pension Protection Act or 2006, 29 CFR 2530.206(c) doesn't apply.  It permits the entry of post-mortem QDROs.  

https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-D/part-2530/subpart-C/section-2530.206#p-2530.206(a)

2.  By what authority does a Plan decide that it will only offer QPSA benefits and not QJSA benefits?

3.  We also have the reality is that a QDRO is not required if the JAD contains all of the information required by law. 

             CAN A JAD =  ERISA Qualified Plans

    All you need for a court order, even a Judgment of Absolute Divorce, to be treated as a “Domestic Relations Order” (which, when approved, that is, “qualified”, by the Plan Administrator, becomes a “Qualified Domestic Relations Order) is: 
    29 U.S. Code §1056(d)(3)(C) provides: 
        “(C) A domestic relations order meets the requirements of this subparagraph only if such order clearly specifies—
            (i) the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order,
            (ii) the amount or percentage of the participant’s benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined,
            (iii) the number of payments or period to which such order applies, and
            (iv) each plan to which such order applies.”
    26 U.S. Code §414(p)(2) provides: 
        “(2) Order must clearly specify certain facts.  A domestic relations order meets the requirements of this paragraph only if such order clearly specifies—
            (A) the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order,
            (B) the amount or percentage of the participant’s benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined,
            (C) the number of payments or period to which such order applies, and
            (D) each plan to which such order applies.”
        Practice Pointer: So make sure that the JAD, or the PSA which will be incorporated into the JAD, include all of the foregoing information, and you will have a skimpy but valid QDRO. 

        Practice Pointer: Use the following paragraph in your Agreements.  I don't know for sure if it will help.  It's what we call a "chicken soup" provision.  What is a "chicken soup" provision you ask?  The Rabbi is eulogizing the dear departed at the funeral service when suddenly an old lady in the back jumps up and, with a thick Yiddish accent, says..."So give him some chicken soup!"  The Rabbi, somewhat flustered, responds that the person is deceased and that chicken soup is not going to help him.  The old lady replies, "Vell, it vouldn't hoyt."  So a chicken soup provision may not help, but it voudn't hoyt.”

        "In the absence of any contrary agreement of the parties set forth elsewhere in this Agreement, in the event of the death of a party, and in the further event that the deceased party has, by document executed prior to the execution of this Agreement, designated the surviving party as a beneficiary of any past, present or future interest in a life insurance or annuity policy, or as a beneficiary or recipient of any past, present or future death or survivor benefit or other amounts payable to the surviving party in connection with any past present or future interest in any pension plan, profit sharing plan, retirement plan, annuity contract, IRA, SEP-IRA, 401(k) plan, 403(b) plan, Federal Thrift Savings Plan, tax deferred income or savings or investment plan, deferred compensation plan, or any other tax deferral or pension or retirement plan or account, or any other defined benefit or defined contribution plans in which the party participates, then in any of such events, and notwithstanding such designation by the deceased party, the surviving party hereby irrevocably waives and relinquishes any and all rights (not provided to him/her by the express terms of this Agreement) which he/she might have as a beneficiary or as a surviving spouse or as a surviving former spouse or otherwise to receive the proceeds of any such life insurance or annuity policy, or to receive any death or survivor benefit or other amounts payable in connection with any such pension, profit-sharing, retirement, annuity, IRA, SEP-IRA, 401(k), 403(b), Thrift Savings Plan, tax deferred income or savings or investment plan, deferred compensation plan, or similar tax deferral or retirement or pension plan or account; or any other defined benefit or defined contribution plans in which the party participates, and the surviving party does hereby irrevocably assign any rights he/she might have to receive such proceeds, benefits or amounts to the estate of the deceased party for distribution pursuant to the Last Will and Testament of the deceased party, or if the deceased party dies intestate, for distribution in accordance with the laws of intestacy. Each party shall execute any document required: (i) to permit the other party to change any beneficiary designation described hereinabove; or, (ii) to waive any right to be treated as a survivor or surviving spouse of the other party; or, (iii) to consent to the jurisdiction of a court of competent jurisdiction to treat the surviving party as a “constructive trustee” for the use and benefit of the estate of the deceased party."

    See Yale-New Haven Hospital v. Nicholls, No. 3:12-cv-01319-WWE, United States District Court, D. Connecticut (2013): 

        “The Court finds the September 5, 2008 Superior Court dissolution of marriage judgment, which included approval of a property settlement agreement, to be a qualified domestic relations order in that it substantially complies with 29 U.S.C. § 1056(d)(3)(B)(i). See id at 444. Indeed, Section 1056(d)(3)(B)(ii) specifically includes approvals of property settlement agreements within the definition of "domestic relations order." As the property settlement agreement designates that "the husband shall transfer to [Claire M. Nicholls] one half of that portion of his PENSION and RETIREMENT ACCOUNTS, which were accumulated during the marriage," Claire M. Nicholls is entitled to these assets. Specifically, Claire M. Nicholls "shall share, in proportion to her ownership interest in the asset, in all earnings, gains, losses, appreciation, and/or depreciation, due to market activity from the date of the final decree for dissolution of marriage to the date of the actual assignment and transfer."  (Emphasis supplied.)

This case was appealed to the United States Court of Appeals, 2nd Circuit, 788 F.3d 79 (2015),
https://scholar.google.com/scholar_case?case=5234149702570753003&q=yale+new+haven+hospital+v+nicholls&hl=en&lr=lang_en&as_sdt=6,33&as_vis=1
The Court of Appeals held: 

        “The Settlement Agreement does not constitute a QDRO because it fails to satisfy the requirements of 29 U.S.C. §1056(d). In particular, the agreement does not "clearly specif[y]" (1) a mailing address for either Claire Nicholls or Mr. Nicholls, see 29 U.S.C. § 1056(d)(3)(C)(I), or (2) the plans to which it applies, see id. § 1056(d)(3)(C)(iv).”

but that two posthumous nunc pro tunc Orders did constitute valid QDROs. 

        “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. ExxonMobil 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).”

See also Mattingly v. Hoge, 260 F. App'x 776, 779 (6th Cir. 2008), where the trial court found that the Divorce Judgment contained all of the information needed for it to be a QDRO - https://casetext.com/case/mattingly-v-hoge-2
where the trial court found that the Divorce Judgment contained all of the information needed for it to be a QDRO. 

    In Festini-Steele v. Exxonmobil Corporation, No. 20-1052, __F.App’x__, 2021 WL 629755 (10th Cir. Feb. 18, 2021), -
https://scholar.google.com/scholar_case?case=9213427610449703594&q=festini+steele+v+exxonmobil+corporation&hl=en&as_sdt=20000006
Plaintiff-Appellant Festini-Steele claims a Decree of Dissolution of Marriage (“Decree”) is a Qualified Domestic Relations Order (“QDRO”) under ERISA that entitles her to proceeds of a group life insurance policy that her ex-husband, Steele, held through Defendant ExxonMobil Corporation. To qualify as a QDRO, a domestic relations order must meet four statutory requirements: (i) the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order, (ii) the amount or percentage of the participant’s benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined, (iii) the number of payments or period to which such order applies, and (iv) each plan to which such order applies.§ 1056(d)(3)(C).

    N.B.  29 USC §1056(d)(3)(B)ii) provides:  
        “(ii) the term “domestic relations order” means any judgment, decree, or order (including approval of a property settlement agreement) which—

            (I) relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and

            (II) is made pursuant to a State domestic relations law (including a community property law).”

    See Sun Life Assurance Company of Canada v.  Jackson, Case No. 3:14-cv-41, United States Court of Appeals, 6th Circuit, 877 F.3d 698 (2017), holding that a Judgment of Divorce complied with the requirements of 29 U.S.C. § 1056(d)(3)(C) and was therefore a QDRO. 

    See the 2016 decision in Cunningham v. Hebert, Case No. 14 C 9292, United States District Court, N.D. Illinois, Eastern Division. November 1, 2016 - that you can find at:
https://scholar.google.com/scholar_case?case=11964931026017663772&q=cunningham+v.+hebert&hl=en&as_sdt=3,29
discussing whether or not the divorce decree satisfied the statutory requirements for a QDRO (no), whether Federal preemption superseded the Settlement Agreement, the terms of which had the former spouse waiving her rights to her former husband’s 401(k) (yes), and whether a constructive trust should be imposed upon the 401(k) plan assets in the hands of the former spouse for the use and benefit of the estate of the decedent (no)? 

    See the 2017 case of Lawson v. Lawson, 570 B.R. 563 (2017).

    Another case where the JAD was held to constitute a QDRO is Teenor v. LeBlanc, Case No. 18-cv-12364, United States District Court, E.D. Michigan, Southern Division (2019).
https://scholar.google.com/scholar_case?case=1984404314460477397&q=Teenor+v.+LeBlanc&hl=en&as_sdt=20000006

     Metropolitan Life v. Beatrice and Sarah McDonald, US District Court, E.D. of Michigan, Case No. 2:17-cv-11912, decided on June 10, 2019.
https://scholar.google.com/scholar_case?case=14843170933717622715&hl=en&lr=lang_en&as_sdt=6,33&as_vis=1&oi=scholaralrt&hist=bY5nDLcAAAAJ:12484640753426065479:AAGBfm1agvHLwT5aWZ_N6PDZrK7iWFqV8A

    Let's say that Leon and Sarah divorce.  The Marital Settlement Agreement (MSA) provides that Sarah will be named as the beneficiary of Leon's employer provided life insurance.  Leon names his new girlfriend, Beatrice, as the beneficiary and then dies.  No QDRO is ever prepared, submitted to the Plan Administrator, or approved.  
    Under existing law dealing with ERISA preemption, the Plan Administrator, in the absence of a QDRO, would be obligated to follow the Participant's written beneficiary designation and pay the proceeds to Beatrice.    
    But what if the MSA, or more correctly, the JAD incorporating the MSA, contains all of the information necessary to make it a valid QDRO?  Then Beatrice would be out of luck and Sarah would receive the proceeds.  
    This same rule applies to employer provided retirement and pension plans governed by ERISA, but mostly not to state or county plans.  Good case.

        In Securian Life Insurance Company v. McAlister, et al, Case No.  6:24-cv-00161-MTK, United States District Court, D. Oregon (February 21, 2025), the decedent, Kenneth  McAlister, participated in an employer sponsored, ERISA qualified, life insurance plan. 
The players are Kenneth’s wife at the time of his death, Mercedes, his former wife, Debra, and the minor child of the marriage of Kenneth and Debra, Rachel.
     The equivalent of a Divorce Decree between Kenneth and Debra  -
        “. . . . ordered Mr. McAlister to make monthly child support payments until each child turned eighteen years old, or if the child was still in school, then until she turned twenty-one years old. [Divorce Decree] at 6. Mr. McAlister was required to "obtain and maintain a life insurance policy on [his] life with face value coverage of not less than $100,000.00 in full force and effect naming the child or children as primary beneficiary or beneficiaries." Id. at 7-8.  He was required to maintain the life insurance policy "until all child support under this Judgment has been fully paid[.]" Id. at 7. The [Divorce Decree] also stated that "[a] constructive trust is imposed over the proceeds of any insurance owned by [Mr. McAlister] at the time of [his] death . . . if said insurance is in force, but another beneficiary is designated to receive said funds." Id. at 8.”

    But, the beneficiary named in the policy at time of his death was Kenneth’s current wife, Mercedes.  Following Kenneth’s death  - 
        “[Mercedes] moves for a declaratory judgment that she is entitled to priority of the life insurance proceeds because she is the policy's designated beneficiary. [Debra] moves for a declaratory judgment that she, as legal guardian of [Rachel, the child of Kenneth and Debra], is entitled to a portion of the life insurance proceeds to provide child support for [Rachel], as mandated by the [Divorce Decree]. For the reasons explained below, the Court finds that the [Divorce Decree] is a Qualified Domestic Relations Order ("QDRO") which triggers the exception to the anti-assignment provision of ERISA, elevating Mr. McAlister's [Kenneth’s] child support obligations above [Mercedes] designated beneficiary status.”   
           
The court held: 

        “[Mercedes] contends that [Debra’s Divorce Decree] does not satisfy the QDRO requirements. The Court finds that [Debra's Divorce Decree] is a QDRO because it substantially complies with the requirements of § 1056(d)(3)(C). Each statutory requirement at issue is discussed in turn.

        “The first statutory requirement is that the DRO specify the name and the last known mailing address of the participant and of the alternate payee(s) covered by the order. 29 U.S.C. § 1056(d)(3)(C)(i). Here, the [Divorce Decree] specifies the name and last known mailing address of the plan participant, Mr. McAlister. Regarding the payee, the [Divorce Decree] awards physical custody of [Rachel] (as a minor child) to both parents. The names and addressed of [Rachel’s] parents, Mr. McAlister and [Debra] are listed throughout the [Divorce Decree]. See [Divorce Decree] at 14-16. As [Rachel's] parents, these addresses aid in the identification of the payee. The [Divorced Decree] also includes [Rachel’s] full name and age. Courts "have liberally interpreted the address requirement for a valid QDRO in light of its purpose as an aid [to] plan administrators in identifying and locating alternate payees under a QDRO." Stewart, 207 F.3d at 1151 (alteration original). The first statutory requirement is satisfied.

        “The next requirement is that the DRO specify "the amount or percentage of the participant's benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined." 29 U.S.C. § 1056(d)(3)(C)(ii). The [Divorce Decree] specifies that "[Mr. McAlister] shall immediately obtain and maintain a life insurance policy on [his] life with face value coverage of not less than $100,000.00 in full force and effect naming the child or children as primary beneficiary or beneficiaries." [Divorce Decree] at 7-8. This requirement is satisfied.

        “Third, the DRO must specify "the number of payments or period to which such order applies[.]" 29 U.S.C. § 1056(d)(3)(C)(iii). Life insurance is customarily paid in a single lump sum, and the [Divorce Decree] here does not specify otherwise. Accordingly, this requirement is satisfied. Stewart, 207 F.3d at 1152 ("because no periodic payments were contemplated, there was no need . . . to determine the number of payments affected by the order").

        “Finally, the DRO must specify "each plan to which such order applies." 29 U.S.C. § 1056(d)(3)(C). In Hartford Life & Accident Ins. Co. v. Valois, the legal separation agreement ("LSA") at issue only mentioned "a policy of life insurance". No. 23-3286, 2024 WL 4678055 (9th Cir. Nov. 5, 2024) (unpublished). However, because "the decedent had but one such policy—the one under the Hartford Plan," . . . [t]he LSA clearly require[d] the decedent to name E.K. as the sole beneficiary on that policy." Id. Holding, "where it is clear which plan is implicated, the LSA substantially complies with ERISA's specificity requirements and is a QDRO." Id. Here, the [Divorce Decree] required Mr. McAlister to obtain and maintain a life insurance policy for the benefit of his children. [Divorce Decree] at 7-8. [Mercedes] has not presented evidence of another life insurance policy which this provision in the [Divorce Decree] could possibly refer to. A plan administrator would therefore have no difficulty determining that the [Divorce Decree] refers to the Securian Plan and that the funds should be distributed to McAlister's minor child [Rachel].

        “The Court finds that the [Divorced Decree] substantially complies with the requirements of § 1056(d)(3)(C) and that the remaining requirements of § 1056(d) are met. The [Divorce Decree] is a QDRO as a matter of law.”

Rachel gets her child support. 

    See Hartford Life & Accident Ins. Co. v. Valois, No. 23-3286, __ F. App’x __, 2024 WL 4678055 (9th Cir. Nov. 5, 2024) at
https://cdn.ca9.uscourts.gov/datastore/memoranda/2024/11/05/23-3286.pdf