can QJ&S be waived in separation agreement?

I've got what used to be a paired MP-PS plan where we merged the MP into the PS 20 years ago back when that was all the rage.  Of course, that MP money is still tracked separately for purposes of making participants who have that money get the proper spousal consent for a distribution.

Now I've got a participant who is saying that when she Legally Separated from her spouse, as part of the separation agreement he waived all rights to her plan benefits.  There is no other plan paperwork to his effect - I presume he is on the beneficiary form as her beneficiary (which predates the separation agreement).  This is a new one to me.  Is this legit?  I feel pretty confident that she is still considered married for plan purposes, but can the spouse waive his rights that way?

Thanks.

40 minutes ago, AlbanyConsultant said:

I've got what used to be a paired MP-PS plan where we merged the MP into the PS 20 years ago back when that was all the rage.  Of course, that MP money is still tracked separately for purposes of making participants who have that money get the proper spousal consent for a distribution.

Now I've got a participant who is saying that when she Legally Separated from her spouse, as part of the separation agreement he waived all rights to her plan benefits.  There is no other plan paperwork to his effect - I presume he is on the beneficiary form as her beneficiary (which predates the separation agreement).  This is a new one to me.  Is this legit?  I feel pretty confident that she is still considered married for plan purposes, but can the spouse waive his rights that way?

Thanks.

State domestic relations law does NOT supersede ERISA's spousal benefit protections  - except in the case of a QDRO that affects parties rights to the plan benefits.  The separation agreement may exhibit an intent to waive plan benefits, but only the QDRO can accomplish the task vis-à-vis the plan.  As between the parties, if the spouse refuses to actually do that which is necessary to waive rights (consent to a distribution or whatever), the court can sanction that party - but this is external to plan operation.

I believe he can waive his right but I also believe it requires a QDRO. Obligatory, I am not a lawyer disclaimer.

From the Pension Distribution Answer Book. QJSA can be waived w/o spousal consent provided there is a court order documenting the separation and there is no QDRO. From your description it appears that each of those conditions have been satisfied.

Q 11:29,Are there circumstances when spousal consent to a participant's election to waive the QJSA or the QPSA is not required?
Last Updated: 10/2022

Yes. If it is established to the satisfaction of a plan representative that there is no spouse, or that the participant's spouse cannot be located, spousal consent to waive the QJSA or the QPSA is not required. If the spouse is legally incompetent to give consent, the spouse's legal guardian, even if the guardian is the participant, may give consent. Also, if the participant is legally separated or the participant has been abandoned (within the meaning of local law) and the participant has a court order to that effect, spousal consent is not required, unless a QDRO provides otherwise. Similar rules apply to a defined contribution plan not subject to the minimum funding standards of Code Section 412, which pays the participant's vested accrued benefit to the surviving spouse upon the participant's death. [ Treas. Reg. §1.401(a)-20, Q&A-27]

A participant may elect out of the QJSA in favor of an actuarially equivalent alternative joint and survivor annuity that satisfies the conditions to be a QJSA, without spousal consent. [ Treas. Reg. §1.401(a)-20, Q&A-16; Notice 2007-7, 2007-5 I.R.B. 395, Q&A-11] (See Q 11:17.) Because a QOSA (see Qs 11:38 – 11:46), by definition, satisfies the conditions to be a QJSA, no spousal consent is required if a plan participant elects a QOSA that is actuarially equivalent to the plans QJSA. If the QOSA is not actuarially equivalent to the QJSA, spousal consent is required for the participant to waive the QJSA and elect the QOSA. [ Notice 2007-7, 2007-5 I.R.B. 395, Q&A-11]

A separated spouse remains a spouse for survivor-annuity or spouse’s-consent purposes.

No matter how long a separation continues, a marriage does not end until a court orders the divorce (or a spouse dies). For example, Davis v. College Suppliers Co., 813 F. Supp. 1234 (S.D. Miss. 1993); see also Board of Trustees of the Equity-League Pension Tr. Fund v. Royce, 238 F.3d 177, 25 Empl. Benefits Cas. (BL) 2394 (2d Cir. 2001) (although a husband and wife were separated for at least the last 15 years of their 19 years of marriage, they remained spouses until the participant’s death; and a written separation agreement had no effect concerning the plan’s or ERISA’s survivor-annuity provisions).

Likewise, a division of spouses’ marital property does not end their marriage. For example, Callegari v. Scottrade, Inc., No. 16-1750, 2016 U.S. Dist. LEXIS 105468 (E.D. La. Aug. 10, 2016) (court-approved consent judgment to separate community property did not end the marriage); Gallagher v. Gallagher, No. 12-40027-TSH, 57 Empl. Benefits Cas. (BL) 2648, 2013 U.S. Dist. LEXIS 26061 (D. Mass. Feb. 26, 2013).

But as with any continuing marriage, a spouse might consent to waive a survivor annuity, and might do so in a way that meets ERISA § 205’s and the plan’s conditions.

Although it’s infrequent, I’ve seen separation agreements that include a qualified election and spouse’s consent even a cautious fiduciary would accept. (It can work if at least one of the separating spouses gets really good lawyering.)

If the participant says a separation agreement includes the spouse’s consent, the plan’s administrator might consider that claim when the participant submits her counterpart of the separation agreement, showing the notary’s certificate and seal or stamp. The plan’s administrator would read at least the part of the agreement that might state the spouse’s consent and decide whether it is sufficient under ERISA § 205’s and the plan’s conditions.

Or, a plan might (but need not) excuse a spouse’s consent “if the participant is legally separated . . . (within the meaning of local law) and the participant has a court order [not a mere separation agreement] to such effect[.]” But, a plan must not excuse a spouse’s consent if a qualified domestic relations order “provides otherwise[.]” 26 C.F.R. § 1.401(a)-20, A-27.

20 hours ago, Peter Gulia said:

Or, a plan might (but need not) excuse a spouse’s consent “if the participant is legally separated . . . (within the meaning of local law) and the participant has a court order [not a mere separation agreement] to such effect[.]”

I was confused because the rest (first part) of your post seemed to directly contradict CuseFan's, but yeah, this was a good recap and confirmed what I thought. I doubt that many participants will meet the higher bar of a court order. Thanks.

A separated spouse is a spouse, and might consent as an unseparated spouse may consent.

A court order of separation is rare.

A separation agreement (even without a court order) could include a qualified election and spouse’s consent.

The plan’s administrator has nothing to decide until the participant submits her claim and its supporting documents.

With respect to defined benefit plans it's all a matter of timing.  If the Participant retires when the parties are still married, and if an election is made at that time for a QJSA for the Alternate Payee as required by law, then the election is locked in and no subsequent waiver will be effective to waive it.  And since Federal law preempts State law, not Court ordered waiver will be enforceable.      

The first impression case the situation outlined above was Fox Valley & Vicinity Const. Workers Pension Fund v. Brown, 897 F.2d 275 (7th Cir. 1990) holding that a post divorce waiver was effective.  Unfortunately this case was abrogated by Kennedy v. Plan Adm'r for DuPont Sav. and Inv. Plan, 555 U.S. 285, 129 S.Ct. 865, 172 L.Ed.2d 662 (2009)."

If the retirement comes after the divorce, and if part of the divorce is a MSA waiver of a QJSA or a Court ruling denying a QJSA, that would be upheld.  

I don't know if the same outcome would happen in a defined contribution plan. I don't know if a defined contribution plan guarantees a QJSA to a spouse.  I don't know if you can elect a QJSA in a defined contribution plan prior to retirement.  I don't know if all plans are now required to have QJSA under SECURE 2.0, or is it still optional. 

But I think it may all be spelled out at 26 CFR § 1.401(a)-20 -

https://www.law.cornell.edu/cfr/text/26/1.401(a)-20

When you read this complicated stuff the use of the word "waiver" almost always relates to what the Participant does, that is, waives a QJSA for a prospective Alternate Payee.  When referring to what the prospective Alternate Payee does, they say "consents" to the waiver of the QJSA by the Participant.  When using "waiver" re: the Alternate Payee they are are almost always talking about the waiver language in the MSA.  

David

Thank you all.

Turns out that we have a much simpler solution in this situation.  In the separation agreement that the participant wants to use to justify not getting her ex's signature, there is language that specifically says that neither party can take a distribution from their respective ERISA retirement accounts until there is a QDRO to determine who gets what benefits.  And, sure, that agreement was from 2014 or 2015, but there's been nothing to replace it and there has been no QDRO, so... do not pass go, do not collect your six-figure plan benefit.  Sure - she signed that literally when she was a new participant (it describes her balance in the plan as "less than $5,000")... but when you're getting total allocations of $25K+ between deferrals and safe harbor and profit sharing for almost a decade, it's easy to not remember that silly little clause.

So I guess the next question is, can you have a QDRO that affects the plan assets while still only separated?  I suppose that's not really my problem - if I get a DRO that meets the qualification requirements, then it will be acted upon, so that's really for the lawyers to work out amongst themselves.

For ERISA § 206(d)(3)(B)(ii), a domestic relations order might include an order one that “relates to the provision of . . . alimony payments, or marital property rights to a [current] spouse[.]”

Recognize that even if the separation agreement’s “language that specifically says that neither party can take a distribution from their respective ERISA retirement accounts” bind the parties to that agreement, it likely does not constrain an ERISA-governed plan’s administrator.

Rather, what would defeat a participant’s qualified election is that it lacks the spouse’s consent.

And as you say, there might be nothing a plan’s administrator need do until it receives a claim to approve or deny, or a court order to treat as a QDRO or not a QDRO.