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Benefits in the News > By Subject >

Distributions - QDROs


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[Discussion] Hardship Distribution for an Alternate Payee?
"Can an alternate payee (ex-spouse) request a hardship distribution from a plan? The plan document is silent. The AP first wanted a loan, which obviously cannot be done because payments cannot be made via payroll deduction." (BenefitsLink Message Boards)
[Discussion] Am I Practicing Law When I Draft a QDRO?
"I don't know why I feel like drafting a QDRO goes over the line, but I think it's because a judge ends up signing the document." (BenefitsLink Message Boards)
Mitigate Qualified Domestic Relations Order Risk with Best Practices
"Major QDRO issues a plan administrator is sure to encounter include: [1] Information: What documents must be made available, to whom must they be given, and in what time frame? [2] Plan procedures: Are procedures necessary? If they are, what must they include? [3] Response disclosures and timeframes: What disclosures must be made and when? [4] Communication: What is the context and/or content when speaking with participants, alternate payees, or attorneys? Recognize that timing is everything." (Findley Davies | BPS&M)
[Discussion] Delayed Receipt of QDRO Qualification
"Are there any impacts under ERISA if the QDRO qualification notice was sent to the Alternate Payee using an address on file and not the address on the QDRO, and the AP now says it took several weeks to receive it (because it needed to be forwarded to the new address)?" (BenefitsLink Message Boards)
ESOPs Can Provide Liquidity to Facilitate Division of a Family-Owned Business Upon Divorce
"The benefit of a financed transaction is that the ESOP can pay for the stock with pre-tax dollars as opposed to the normal stock repurchase arrangement between spouses which would require one spouse to generally use after-tax dollars for the purpose of buying out the former spouse's interest in the stock. Essentially the U.S. government is subsidizing the initial cost of the buy-out through use of tax deductible payments." (Butterfield Schechter LLP)
Ex-Wife Can Pursue Pension Claims Against NFL Plan
"The ex-wife of a former New England Patriots player can move forward with her claims to recover pension benefits from her late ex-husband ... Garcia-Tatupu seeks to collect pension benefits of her late ex-husband Mosiula F. Tatupu, who played for the Patriots from 1978 to 1990 and died in 2010.... [The judge's] decision is noteworthy because of his discussion of posthumous qualified domestic relations orders." [Garcia-Tatupu v. Bert Bell/Peter Rozelle NFL Player Retirement Plan, No. 16-11131 (D. Mass. Apr. 18, 2017)] (Bloomberg BNA)
Fact Sheet: What Is a Qualified Domestic Relations Order and Why Should I Care?
"A retirement plan can be the largest asset in a marriage. Nonetheless, retirement plans are often forgotten or overlooked during divorce, in part because divorce is so complicated and in part because a divorce can occur years before retirement -- and who's thinking about retirement when it's 10 or 20 years down the road? If they don't have the right kind of court order, people going though divorce could neglect a significant portion of the marital assets and put themselves at risk of economic insecurity in retirement." (Pension Rights Center)
Beware the Retroactive QDRO
"Some courts accept the legal fiction that the order relates back to the original date; others do not. The district court decided that it would accept the order as having been entered in 1993 so that at the time it was entered there was a benefit to be split. As of that date, if the order had been implemented it would not have provided for increased benefits. Therefore, the plan was required to pay a survivor benefit to Ardella, the alternate payee, even though the participant had elected -- and been paid -- a life annuity that was larger in amount than the benefit that would have been paid to him if he had elected a survivor annuity for Ardella's benefit. Employers will need to monitor the cases in the jurisdictions in which they operate to determine whether courts will allow retroactive QDROs." [Patterson v. Chrysler Group, No. 15-10563 (E.D. Mich. Feb. 17, 2016)] (Stinson Leonard Street)
ESOP Disqualified for an Improper Transfer of Assets After Divorce
"In this case, the ESOP transferred the account balance under what it believed was stated in a legally binding divorce decree. However, the plan did not undertake any processes to determine whether the transfer was pursuant to a QDRO and, in fact, it was not.... That failure to follow the tax rules even though the plan document clearly stated those rules led to the disqualification of the plan." [Family Chiropractic Sports Injury & Rehab Clinic, Inc. v. Comm'r, No. 29613-13R (T.C. Memo. Jan. 19, 2016)] (RSM US)
Death and Taxes for Qualified Plans
"[No] standard IRS correction procedure exists to remedy a transfer of a plan benefit by a participant outside of the QDRO rules. In [a recent Tax Court case], undoing the illegal assignment of the ex-wife's ESOP account may have simply been unacceptable to the IRS and/or the parties under the circumstances." [Family Chiropractic Sports Injury & Rehab Clinic, Inc. v. Comm'r, No. 29613-13R (T.C. Memo. Jan. 19, 2016)] (Jackson Lewis P.C.)
[Official Guidance] Text of PBGC Submission of Information Collection for OMB Review and Comment Request: Qualified Domestic Relations Orders Submitted to PBGC (PDF)
"PBGC is not making any substantive revisions to the current QDRO booklet. PBGC is adding text to clarify how separate interest orders are administered by PBGC and to explain how PBGC apportions adjustments required by ERISA's Title IV limitations on benefits between an alternate payee and a participant, as well as the consequences of such adjustments on each party. PBGC is also making other simplifying and clarifying changes to the QDRO booklet.... PBGC is requesting that OMB extend approval of the collection of information for three years." (Pension Benefit Guaranty Corporation [PBGC])
Retirement Plan Asset Sharing in a Divorce: Mistakes Can Be Costly (PDF)
"Do people involved in the review of DROs expose themselves or their firm to the proposed DOL fiduciary rule? Although the likelihood is 'no,' there may be 'experts' who say 'maybe.' ... Other concerns for reviewers: ... One or more outstanding plan loans, the repayment of which could be addressed in the DRO.... [The] language sets forth the sharing in a defined benefit plan, described as if the Alternate Payee will have a separate account in the plan, and the plan only allows sharing via a sharing of the participant's stream of payments ... The plan is sponsored by an employer in a community property state." (Howard M. Phillips, in Plan Consultant)
'Till Death Do Us Part? Second Circuit Affirms Validity of After-Death QDROs
"While this case might suggest that plan administrators are entering a world of uncertainty where a posthumously entered QDRO can lay claim to death benefits already paid to another named beneficiary, existing case law suggests that such fear may be unwarranted. First, if plan administrators make a distribution in accordance with plan terms prior to receiving notice of a conflicting claim, they should be well positioned to defend any claim of liability for a subsequent claim. Second, if plan administrators are made aware of the conflicting claims prior to distribution of benefits, they can follow the example set by [this employer] and ask a court to make the determination." [Yale-New Haven Hosp. v. Nicholls, No. 13-4725-cv (2d Cir. June 4, 2015)] (Day Pitney LLP via Lexology)
Until Divorce Do Our Plan Benefits Part
"[T]he Second Circuit ruled that a posthumously entered QDRO can retroactively assign retirement plan assets to a participant's former spouse, even where the second (and current) spouse had a claim to survivor benefits under the plan.... [E]ven though the marital settlement agreement did not constitute a QDRO, the Second Court found that the later-issued court orders did qualify as QDROs with respect to the three identified plans. Therefore, even though the current wife was the named beneficiary under all the plans, she was only entitled to benefit under the fourth, unnamed plan." [Yale-New Haven Hosp. v. Nicholls, No. 13-4725-cv (2nd Cir. June 4, 2015)] (Bloomberg BNA)
[Guidance Overview] A Little Refresher Course on QDROs and Governmental Plans
"[A] QDRO cannot be enforced against a governmental plan which contains an anti-alienation clause.... [A]lthough a so-called QDRO might be enforceable as an Income Deduction Order under Section 61.1301, Florida Statutes, if it is for collection of either alimony or child support, it cannot be used to force direct payment to another of a retiree's pension benefits in order to achieve an equitable distribution of the parties' marital assets.... In an extremely well reasoned opinion, the First District Court of Appeal discussed all of the above arguments and correctly rejected them, holding that a trial court lacked the power to order a governmental pension plan to pay to one former spouse a portion of the other former spouse's retirement pension benefits as part of a plan for equitable distribution of marital assets." (Cypen & Cypen)
Kentucky Pension Underfunding Complicates Divorce Settlements
"[O]ne of the things Bob earned over his years with the state was a promise from the state to pay a certain amount of benefits upon his retirement. The present value of that promise -- when it's certain -- can be calculated in today's dollars, and many divorces are resolved using this present value.... However, chronic underfunding has now rendered the value of those future benefits uncertain. Courts in other states have ruled that the value of a pension must be reduced to account for contingencies such as the insolvency or illiquidity of the plan." (heraldleader.com)
D.C. Court of Appeals: Survivor Benefit in Undistributed Benefits Irrevocably Vests Upon Retirement; ERISA Pre-empts State Law Constructive Trust Effort (PDF)
"John argues that the divorce decree and this Texas statute entitle him to a declaration that he 'has equitable title' to Melissa's survivor benefit, and that upon receipt of her annuity, Melissa is bound by Texas law to deliver it to John's designee.... The conflict between ERISA and Texas law could hardly be starker -- what ERISA gives to Melissa, John argues, Texas takes away. But as the Supreme Court held ... 'in the face of this direct clash between state law and the provisions and objectives of ERISA, the state law cannot stand.' ... This case involves an effort by a plan participant to obtain an interest in undistributed plan benefits, and we hold only that absent a qualified domestic relations order and compliance with ERISA's strict waiver provisions for survivor annuities, he may not use state law for that purpose. This opinion has nothing to say about how ERISA might affect an effort by a plan participant to use state law to obtain an interest in benefits after distribution to the beneficiary." [Vanderkam v. Vanderkam, No. 13-5163 (D.C. Cir. Jan. 20, 2015)] (U.S. Court of Appeals for the District of Columbia Circuit)
Text of District Court Opinion: Wife's Claim for Share of Husband's Retirement Plan Was Included in Her Bankruptcy Estate Because Not Reduced to a QDRO at Time of Bankruptcy Filing (PDF)
"As part of his divorce complaint, [the husband] requested equitable distribution of their marital property ... [A]t the time Appellant filed her bankruptcy petition, no final state court order had been entered related to any of the matters raised in the complaint and counterclaim in the divorce action.... Pursuant to the Bankruptcy Code, ... [a] debtor may exempt 'retirement funds' if they are in an 'account that is exempt from taxation' under certain enumerated provisions of the Internal Revenue Code.... Appellant does not qualify for the claimed exemptions." [Urmann v. Walsh, No. 14-718 (W.D. Pa. Oct. 24, 2014)] (U.S. District Court for the Western District of Pennsylvania)
QDROs Demand the Attention of CPAs
"A lawyer who practices family law usually takes the lead in drafting the QDRO, but he or she usually enlists one or more CPAs to apply their financial expertise to the QDRO provisions to ensure an equitable division of retirement assets between the divorcing spouses without triggering negative tax consequences. While some CPA firms already have added divorce planning as a separate line of service, the market is not saturated." (Journal of Accountancy)
How to Avoid Errors in QDROs
"QDRO-related errors recordkeepers or plan sponsors should keep an eye out for [include]: ... Attempting to get the plan to pay attorney fees; Attempting to have taxes related to the alternate payee distribution paid from the participant's account; and Failing to provide sufficient contact and Social Security information for the alternate payee.... [R]ecordkeepers and plan sponsors should also pay special attention to: Properly preserving or restricting the alternate payee's portion when notified of a DRO situation; Any provision that cannot be administered or conflicts with the terms of the plan; and Identifying same-sex couples' DROs for tax reporting purposes." (PLANSPONSOR)
QDROs for Unmarried Cohabitants in Alaska?
"The [Supreme Court of Alaska] court cited a Ninth Circuit decision relating to Washington law but concluded that Alaska law also provided 'marital property rights' to cohabitants and provided for property distributions when a cohabitant relationship dissolved. The court then concluded that the woman qualified as an alternate payee because she was a 'dependent' of the participant.... However, the court's interpretation of Alaska law might not be an interpretation accepted by the pension plan, which would need to approve a QDRO before it was implemented." Boulds v. Nielsen, No. 6901 (Alaska Apr. 25, 2014)] (Stinson Leonard Street)
After Windsor, Same-Sex Marriage Laws Continue to Present Challenges for Retirement Plan Sponsors (PDF)
"[P]lan sponsors [should] pay special attention to the following items: [1] Payment of RMDs. A participant who has been receiving payments based on an unmarried status due to the application of DOMA may request that payments be recalculated based on a married status by providing the spouse's date of birth. [2] QPSA and QJSA payments and death benefits under certain defined contribution plans ... [3] In-service withdrawals and loans ... [4] QDROs." (Prudential)
The Seven '403(b) Administrative' Sins (Part 2)
"Sin #4: Qualified Domestic Relations Orders (QDROs) ... A typical example is that a QDRO to the plan simply provides an asset split percentage to an alternative payee. However, upon implementation, not all plan assets were taken into account, and one or more provider contracts with respect to that participant were missed. The inadequate QDRO procedures results in a plan violation, but more importantly, it's a violation of a court order, and is patently unfair to the alternate payee." (The Principal Blog)
[Guidance Overview] 2013 Q&As: DOL Meeting with ABA Joint Committee on Employee Benefits, May 8, 2013 (PDF)
7 pages. Topics include: whether a prohibited transaction occurs when a service-provider makes charitable contribution to a plan sponsor, unreasonableness of certain fees for handling QDROs, Form 5500 reporting of a service-provider's prohibited transactions under the fee disclosure rules, whether a participant in a defined benefit plan has standing to seek enforcement of fiduciary standards, and applicable fiduciary standards when purchasing annuity contracts for distribution to participants. Note: "The responses reflect only unofficial, nonbinding staff views as of the time of the discussion, and do not necessarily represent the official position of the DOL." (Joint Committee on Employee Benefits, American Bar Association)
[Official Guidance] DOL Technical Release No. 2013-04: ERISA Definition of Marriage Includes Same-Sex Persons Validly Married in State Where Marriage Was Celebrated
"In general, where the Secretary of Labor has authority to issue regulations, rulings, opinions, and exemptions in title I of ERISA and the Internal Revenue Code, as well as in the Department's regulations at chapter XXV of Title 29 of the Code of Federal Regulations, the term 'spouse' will be read to refer to any individuals who are lawfully married under any state law, including individuals married to a person of the same sex who were legally married in a state that recognizes such marriages, but who are domiciled in a state that does not recognize such marriages. Similarly, the term 'marriage' will be read to include a same-sex marriage that is legally recognized as a marriage under any state law.... The terms 'spouse' and 'marriage,' however, do not include individuals in a formal relationship recognized by a state that is not denominated a marriage under state law, such as a domestic partnership or a civil union, regardless of whether the individuals who are in these relationships have the same rights and responsibilities as those individuals who are married under state law." (U.S. Department of Labor)
[Guidance Overview] The Demise of DOMA's Core: Employer Response Avenues in the Wake of Windsor (PDF)
"As a practical matter, until additional guidance is issued, definitive answers to the multifarious open issues, beyond those addressed in Revenue Ruling 2013-17, remain elusive. In addition to tax and financial implications, employers must also consider the impact of their decisions on employee relations, such as: (i) whether to extend all or some benefits to lawfully married same-sex spouses who reside in jurisdictions that do not recognize their marriage; and (ii) whether to require proof of same-sex marriages if the employer does not require proof of opposite-sex marriages." (Haynes and Boone, LLP)
[Opinion] The Retirement Equity Act and Beyond
"Women have made enormous strides over the past three decades, in the workplace and beyond -- and it's important to reflect on the men and women who fought for the changes that have led to greater gender equality. One of those changes was introduced 29 years ago: The Retirement Equity Act became law, ushering in important protections for America's workers and their families.... The act lowered the minimum age requirement for pension plan participation, it prevented plans from penalizing parents who took time off to raise families, it allowed pension plans to make court-ordered payments to former spouses and it mandated spousal consent for workers to waive survivor benefits. In short, it began to recognize the working patterns of women, who remain more likely to interrupt their careers to take care of a family member, and provided greater retirement protection for women throughout the country." (Phyllis Borzi via DOL Blog)
[Official Guidance] IRS Revenue Ruling 2013-17: Federal Tax Treatment of Same-Sex Spouses and Domestic Partners (PDF)
"ISSUES: 1. Whether, for Federal tax purposes, the terms 'spouse,' 'husband and wife,' 'husband,' and 'wife' include an individual married to a person of the same sex, if the individuals are lawfully married under state 1 law, and whether, for those same purposes, the term 'marriage' includes such a marriage between individuals of the same sex. 2. Whether, for Federal tax purposes, the Internal Revenue Service ... recognizes a marriage of same-sex individuals validly entered into in a state whose laws authorize the marriage of two individuals of the same sex even if the state in which they are domiciled does not recognize the validity of same-sex marriages. 3. Whether, for Federal tax purposes, the terms 'spouse,' 'husband and wife,' 'husband,' and 'wife' include individuals (whether of the opposite sex or same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law that is not denominated as a marriage under the laws of that state, and whether, for those same purposes, the term 'marriage' includes such relationships." (Internal Revenue Service)
[Official Guidance] Answers to Frequently Asked Questions for Individuals of the Same Sex Who Are Married Under State Law (PDF)
"These questions and answers reflect the holdings in Revenue Ruling 2013-17, 2013-38 IRB.... Q10. If an employer provided health coverage for an employee's same-sex spouse and included the value of that coverage in the employee's gross income, can the employee file an amended Form 1040 reflecting the employee's status as a married individual to recover federal income tax paid on the value of the health coverage of the employee's spouse? A10. Yes, for all years for which the period of limitations for filing a claim for refund is open. Generally, a taxpayer may file a claim for refund for three years from the date the return was filed or two years from the date the tax was paid, whichever is later. If an employer provided health coverage for an employee's same-sex spouse, the employee may claim a refund of income taxes paid on the value of coverage that would have been excluded from income had the employee's spouse been recognized as the employee's legal spouse for tax purposes." (Internal Revenue Service)
[Guidance Overview] Windsor Decision Brings Equal Benefits to Some Same-Sex Couples and Compliance Concerns to Employers
"Employers should check with their insurance carrier and legal counsel to determine whether state law requires the carrier to cover same-sex spouses and whether their plan document and summary plan description must be amended to reflect the extended coverage. Employers who extend coverage to same-sex spouses also will have to determine whether employees will be allowed to add a same-sex spouse to a health plan midyear based on the employees' 'change in status.' ... When employers must stop imputing income remains an open question... Employers will likely see an increase in qualified domestic relations orders ('QDROs') resulting from the dissolution of same-sex marriages." (New Jersey Chapter, Association of Corporate Counsel)
8th Circuit Finds Prenuptial Agreement Did Not Waive Surviving Spouse's Right to Deceased Participant's 401(k) Account (PDF)
"As a whole ... the antenuptial agreement is equivocal whether Kathy waived her rights at all. Sections B(8)(b) and (c) of the antenuptial agreement contemplate the future execution of a waiver or consent to change in beneficiary.... In light of this promise to execute a waiver and in the absence of the fulfillment of this promise, Kathy could not have meaningfully acknowledged the effect of any waiver of her spousal rights in the antenuptial agreement.... [T]he antenuptial agreement failed to inform Kathy -- in clear and express terms -- that she both had a spousal right to receive the funds in the MEC 401(k) Plan and that she was waiving this right." [MidAmerican Pension and Employee Benefits Plan Administrative Committee v. Cox, No. 12-3563 (8th Cir. July 12, 2013)] (U.S. Court of Appeals for the Eighth Circuit)
[Guidance Overview] Supreme Court Rules Part of DOMA Unconstitutional; Employer Action Steps Suggested
"[T]here are at least five steps that any affected employer should now be considering: [1] Stop imputing income for federal income and FICA tax purposes on health plan coverage provided for a same-sex spouse, but continue imputing income for state income tax purposes if the employee resides in a non-recognizing state; [2] Communicate the Supreme Court's decision to employees, and request that any employees in same-sex marriages that may not be known to the employer identify themselves; [3] Offer a mid-2013 enrollment right under welfare plans for same-sex spouses not previously eligible; [4] Identify all employee plan provisions that may be affected by a changed definition of the term 'spouse'; [and] [5] Identify all past and present employees who are in a same-sex marriage." (The Wagner Law Group)
Third Circuit Finds Increased Retirement Benefit Offered Under Reduction-in-Force Plan Is Early Retirement Subsidy Subject to QDRO (PDF)
"[The plan] but excluded from that calculation the increase in [plaintiff's] ex-husband's pension that was payable under [the employer's] policy that entitled an early-retirement eligible employee to the full amount that would have been payable at age 65 if he or she was terminated as part of a reduction-in-force ... The District Court [found] that the ... separation policy did not provide a subsidy for early retirement because it was payable 'on account of' contingencies other than early retirement ... [The Third Circuit Court of Appeals finds] that, because a purpose of the separation benefit is to enhance early retirement benefits and is payable only to employees who are eligible for early retirement, the ... policy does indeed provide a subsidy for early retirement." [Gruber v. PPL Retirement Plan, No. 12-2123 (3rd Cir. April 9, 2013)] (PLANSPONSOR.com)
Supreme Court Rules DOMA Unconstitutional (PDF)
"[The Windsor decision] does not require all states and state officials to institutionalize or recognize same sex marriages. It let stand a provision in DOMA which permits a state not to recognize a same sex marriage that is valid in another state. This decision expands the financial planning options available to legally married same sex couples in a variety of areas." (ING)
[Opinion] Supreme Court Marriage Decision Affects Retirement Plans
"Here are just a few issues suddenly opened to same gender spouses in those states that recognize such marriages: [1] Spousal rollovers; [2] Delay in taking required minimum distributions after death; [3] Extended period to take required minimum distributions; [4] Spousal protections in joint and survivor plans; [5] 100% of the death benefit in non-J&S plans unless the spouse consents; [6] QDROs, without regard to whether the spouse qualifies as a dependent; [7] Certain hardship distributions without regard to whether the spouse qualifies as a dependent." (SunGard Relius)
[Guidance Overview] Effect on Benefits Plans of the Supreme Court Decision on DOMA
"[E]mployers with pension and 401(k) plans will be required to recognize same-sex spouses for purposes of determining surviving spouse annuities or death benefits. The same-sex spouse of an employee will also be able to elect spousal rollovers to his or her own [IRA] upon the employee's death, enabling the surviving spouse to receive payments over his or her lifetime.... [An] employee with a same-sex spouse will have to obtain spousal consent to change the beneficiary of his or her retirement benefit ... If a same-sex couple divorces, benefits in qualified retirement plans may be split pursuant to a [QDRO].... [T]he decision will simplify life for employers who currently provide welfare benefits to same-sex couples by eliminating the current situation in which employers provide tax-free benefits to opposite-sex partners, but must tax benefits to same-sex partners. In addition, an employee with a same-sex spouse will now be able to contribute to health savings and flexible spending accounts at the same levels as an employee with an opposite-sex spouse. COBRA will apply to same-sex spouses." (Thompson Hine)
QDRO Cannot Change Existing Beneficiary of Joint and Survivor Annuity
"The court held that a survivor benefit irrevocably vests in the beneficiary at the annuity starting date and cannot be reassigned thereafter by a domestic relations order.... And what of [the ex-wife's] waiver of the QJSA [pursuant to a divorce decree]? Not only was this found ineffective against the plan, but the court held that ERISA would preempt any attempt to impose a constructive trust under Texas common law on any survivor benefits received by Melissa under the Plan." [VanderKam v. PBGC, No. 09-cv-01907 (D.D.C. May 7, 2013)] (Calhoun Law Group)
Participant's Spouse's Interest in QJSA Vests on the Annuity Start Date and Cannot Be Divested by Subsequent QDRO (PDF)
"Because John was married to Melissa at the time of his retirement, and because John and Melissa did not elect to waive the QJSA benefit or elect another benefit option within the 90-day window ..., PBGC concluded that the survivor annuity benefit irrevocably vested in Melissa at the time of John's retirement.... In view of the thorough explication that PBGC offered for its determination -- including the detailed discussion and application of the above-described cases to the issues presented in Plaintiffs' appeal -- the Court finds that PBGC's decision was based upon reasoned decisionmaking and is rationally supported by the record and by applicable law." [VanderKam v. PBGC, No. 09-cv-01907 (D.D.C. May 7, 2013)] (U.S. District Court for the District of Columbia)
ERISA Does Not Bar Post-Distribution Action to Enforce Waiver Against Beneficiary
"[The Fourth Circuit] explained that ERISA does not provide shelter from contractual liability to beneficiaries who have already received plan proceeds. In concluding that ERISA did not prevent post-distribution suits, the court further noted that such actions do not conflict with ERISA as they do not require plan administrators to pay benefits to anyone other than the named beneficiary. The estate's claim merely sought to enforce a state order that did not conflict with ERISA's objectives." (Wolters Kluwer Law & Business)
Delay in Providing QDRO to Plan Causes Ex-Spouse to Lose Survivor Benefits Awarded Under Divorce Decree
"The divorce decree provided that Patricia, [Gary's] former spouse [of almost 30 years at their divorce in 1993], would be ... named as the survivor beneficiary if Gary elected a pension with a survivor benefit.... Gary remarried ... [and] made a pension benefit election, choosing a joint and 50% survivor annuity in favor of Shelly, his new wife.... [In 2005, Patricia served an order on the plan.] Gary then died [later in 2005] ... The [Minnesota Supreme Court] concluded that Shelly's right to the survivor benefit vested when Gary retired and elected a survivor benefit in her favor. Because Patricia did not provide the domestic relations order to the plan until after Gary had elected his form of retirement benefit, it was too late for Patricia to claim her share of Gary's pension, at least from the portion otherwise payable to Shelly (which after Gary's death, was the only benefit being paid)." (Leonard, Street and Deinard)
Workforce Reduction Supplemental Benefits Counted as Subsidized Early Retirement for QDRO
"The appeals court determined that the supplemental benefit was an 'employer subsidy for early retirement so that eligible participants would not have to receive actuarially reduced retirement benefits when they were effectively forced to retire before age 65.' According to the court, the employer's reason for providing the supplemental benefit -- its workforce reduction -- did not change the fact that the benefit increased a participant's pension benefits over the actuarially-calculated amount." [Gruber v. PPL Retirement Plan, No. 12-2123 (3d Cir. Apr. 9, 2013)] (Bloomberg BNA)
Today in ERISA History: Retirement Equity Act of 1984 Signed Into Law
"Aug. 23, 1984 -- The Retirement Equity Act of 1984 (REA), Pub. L. 98-397, is signed into law by President Ronald Reagan. REA made a number of significant changes which have become a part of our daily plan language, including QDROs, QJSA, and Code section 417." (The Pension Protection Act Blog)
[Official Guidance] PBGC Wants Comments on Revisions to Booklet About Submission of QDROs (PDF)
"PBGC intends to revise the booklet, Qualified Domestic Relations Orders & PBGC, to describe a proposed change in PBGC's procedures that would apply when a draft domestic relations order is submitted for informal review. Under PBGC's current procedures, PBGC delays the commencement of benefits (for participants not in pay status) or suspends payment of benefits (for participants in pay status) from the date of receipt of a draft domestic relations order to up to 60 days after the date PBGC notifies the parties of the results of the review. Under the proposed change, PBGC would suspend payments for participants in pay status only upon receipt of an original signed domestic relations order or a certified or authenticated copy. PBGC is also revising or eliminating certain model language which has often led to confusion as to how the language was to be interpreted." (Pension Benefit Guaranty Corporation)
[Guidance Overview] Basics of QDROs and QMCSOs for Plan Sponsors (PDF)
Materials prepared for use in a webinar. Topics included: QDRO basics, including types of benefit divisions (segregated benefits, shared payments, and plan design alternatives); processes and procedures for QDRO administration; QDROs and nonqualified retirement plans; QDROs and equity compensation and other executive programs; and QMCSO basics. (Morgan Lewis)
[Guidance Overview] Spousal Consent Requirements for Qualified Retirement Plans
"If a married participant in a retirement plan with survivor annuity benefits wants to receive a distribution in a different form, the spouse must provide written consent and the consent must be witnessed by a plan representative or notary public. This requirement also applies if the participant applies for a plan loan. However, if the participant is not married, or there is satisfactory evidence that the spouse cannot be located, spousal consent is not necessary." (McKay Hochman)
[Guidance Overview] Spouse Waived Right to Proceeds from 401(k) Plan of Former Spouse Who then Did Not Replace Named Beneficiary
"The district court held that estate could not attempt to recover the funds by bringing suit directly against [the named beneficiary] to enforce her waiver. The Third circuit reversed in part. Permitting suits against beneficiaries after benefits have been paid does not implicate any concern of expeditious payment or undermine any core objective of ERISA." (Justia.com)
Ensure your Plan Participants are Prepared for a Secure Retirement
Defined Contribution Conference, March 11-13, in Miami. Learn from your peers through presentations and discussions on plan design, communications, investment options and more. FREE registration for qualified plan sponsors. (Pensions & Investments)
Avoid the Common Mistakes Affecting Plan Loans Webcast
Earn CE credit while ERISA expert, Charles Lockwood, JD, LLM, explains the administrative issues that affect plan loans. Have questions? Charles will address them either during or after the webcast. March 22nd at 2pm EST. (ASC)
When Divorce Unravels Retirement Plans
"For starters, both parties in a divorce are likely to face a drop in their living standard. But women tend to fare worse, says Karen C. Altfest, executive vice president at Altfest Personal Wealth Management in New York. On average, they work fewer years than men since they are more likely to take time off to raise the children. This means they haven't built up as many assets and therefore have less negotiating power." (The Wall Street Journal)
[Guidance Overview] Creative Divorce Planning: Applying the QDROtic Equation
"The recently decided Fifth Circuit decision, Brown v. Continental Airlines, Inc., demonstrates how nine airline pilots and their spouses creatively used qualified domestic relations orders (QDROs) and state domestic relations law to circumvent the retirement plan rules." (Fox Rothschild LLP)
Ex-Husband Not Liable for Retirement Account's Drop in Value, Says Court
"The Arkansas Supreme Court on Thursday struck down a circuit judge's ruling that held a man liable for the decreased market value of his ex-wife's half of his retirement account following their divorce." (Arkansas News)
[Guidance Overview] Despite Phony Divorces, Pension Plan Must Pay Spousal Benefits
"When a plan administrator fears that a DRO was fraudulently obtained, the plan administrator is not free to ignore evidence of a sham divorce. A DRO issued under false pretenses may not have been validly issued based on state domestic relations law and would, in that case, not meet the requirement of a 'domestic relations order' under ERISA Section 206(d)(3)(B)." (SmartHR)
[Guidance Overview] Fifth Circuit Agrees That Plan Administrator Cannot Revoke QDRO for Suspected Lack of Good Faith Divorce
"Although plan administrators generally are not required to analyze an order's validity under state domestic relations law, an earlier DOL advisory opinion that also addressed allegedly fraudulent divorces (but was not mentioned by the court) advised that if a plan administrator had received credible evidence that an order was fraudulently obtained, it should take reasonable steps to determine the order's credibility." (Thomson Reuters/EBIA)
The 'Splitting' [Pension] Headaches of Late-Life Divorce
"[D]ividing a nest egg in a way that allows both spouses to retire without worry is crucial when there is little work time left to make up any shortfall, says [a financial adviser]." (The Wall Street Journal)
[Guidance Overview] The Boundary of Fiduciary Responsibility
"Apparently, the court was convinced that since ERISA's recipe for qualifying a DRO as a QDRO had no subjective component, Continental had no recourse under ERISA with respect to a DRO that otherwise satisfied the objective requirements of a QDRO." (Trucker Huss, APC)
[Guidance Overview] Think Your Employee's Divorce is a Sham to Get at Retirement Benefits? Don't Out-Think Yourself
"On Monday, the Fifth Circuit issued its opinion in Brown v. Continental Airlines, Inc., 2011 WL 2780505 (5th Cir.), a rather unusual case addressing what a plan administrator's obligations are with respect to a Qualified Domestic Relations Order (QDRO) when the plan administrator thinks the underlying divorce that produced the order was a sham." (Constangy, Brooks & Smith, LLP)
[Guidance Overview] 5th Circuit Affirms Decision in Continental Sham Divorces Case
"Continental alleges that the pilots and spouses obtained 'sham' divorces for the purpose of obtaining lump sum pension distributions from the Continental Pilots Retirement Plan, which they otherwise could not have received without the pilots' separating from their employment with Continental." (PLANSPONSOR.COM)
Determination of Pension Benefits
This edition of the firm's newsletter includes several items on pension cases; see item numbers 4, 5, 6, 7 and 10. (Cypen & Cypen)
[Guidance Overview] Tribal Court Domestic Relations Orders May Be Qualified DROs (PDF)
"The DOL concluded that such tribal court orders may be recognized as QDROs provided applicable State law recognizes or treats tribal court orders as issued pursuant to state law." (Prudential Retirement)

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