PPA of 2006 - Time of entry of QDRO

[fmsinc]

 29 CFR Section 2530.206(c) states that 

"(c) Timing.
(1) Subject to paragraph (d)(1) of this section, a domestic relations order shall not fail to be treated as a qualified domestic relations order solely because of the time at which it is issued."  We all know what this means or do we.  It certainly means that a QDRO can be entered for the benefit of the Alternate Payee if the Participant had died before a QDRO is approved. But does it also mean that the estate of the Alternate Payee can obtain a QDRO if the Alternate Payee dies before a QDRO has been entered? 

We know this means that, with respect to defined benefit an defined contribution plans, a QDRO can be entered in favor of an Alternate Payee if the Participant has died before the QDRO was approved. 

But can the Alternate Payee's estate obtain a QDRO when it is the Alternate Payee that has died before the QDRO has been entered and you are dealing with a ERISA qualified defined contribution plan? 

Thanks,

David

[david rigby]

IMHO, yes.  However, that does not automatically mean the resulting DRO will be qualified by the PA.  Just an opinion.

[Peter Gulia]

DSG, for an analysis of some (not all) of the issues, read or re-read 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. Super. Ct. 1998).

Interpreting ERISA § 206(d)(3) and applying § 206(d)(3)(K), the 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.

While a California court’s opinion sets no precedent for any Federal court, some judges might adopt or adapt Shelstead’s reasoning.

Some plans’ administrators might follow Shelstead’s, or even harsher, reasoning regarding a would-be alternate payee who died before the order one hopes is a QDRO is made.

For an order directed to an individual-account (defined-contribution) retirement plan, a plan’s administrator might be less likely to deny QDRO treatment if the order, instead of providing for a payment to some named person other than the decedent, provides that a separate interest not paid or distributed before the alternate payee’s death is distributable to the alternate payee’s estate.

This is not advice to anyone.

[fmsinc]

Peter Gulia:  

Gulp. I have struggled with this issue for quite some time.  See two Memos I have in my files. 

TRANSFERRING THE ALTERNATE PAYEE'S ERISA PENSION AND RETIREMENT.pdfBoggs and Terminable Interest Etc.pdf

 

The variables are: (i) the PPA of 2006; (ii) defined benefit plan vs. defined contribution plan; (iii) Federal preemption of state law or agreement of the parties or Judgment of Divorce. 

I seem to be in the minority in thinking that Boggs doesn't mean what everybody else thinks it means. 

Thanks for your input. 

David