Reversing a QDRO

A QDRO was received and approved on a participant's pension (DB) benefit.  The order was a separate-interest order (i.e. not a stream-of-payment).  It turns out, it never should have been filed, and both parties agree (according to the participant, anyway).

The Participant has not begun receiving payments.  We don't know yet if the AP has.

• Assuming she has not begun her benefit, can we simply have them provide an amended QDRO, reversing everything?
  • In the meantime, is it okay practice to lock her benefit until we can get it settled?  (I realize this would only be necessary if she thinks she is entitled to the benefit, but we just don't know yet).
• If she has begun her benefit, is there anything we can do?  We can't stop the benefit once it is in place, so the only option I can think of is for him to get a 100% stream-of-payment QDRO on what she is currently receiving.

Thanks all!

Since you have a valid QDRO in hand, you need to follow its terms.  I would not suggest that the Plan Administrator act contrary to the QDRO's terms particularly if the action would prevent or inhibit the spouse's right to decide when payments should commence.  One would think if the spouse somehow wants to walk away from the QDRO, she would not begin receiving benefits and would communicate her change of heart directly to the Plan Administrator.

The QDRO has contact information for the spouse, so it should be easy for the Plan Administrator to find out what the spouse's position is about the QDRO. 

If there seems to be a consensus, then the PA should ask each party to consult their respective attorneys about asking the court to change or nullify the QDRO.  It would be interesting to hear if they succeed in getting some form of amendment or agreement that supersedes the original QDRO.

Tread carefully.  Creating a QDRO very often is a highly emotional event and it is not rare that one party just likes making life more difficult for the other party.

Assuming that neither has started benefits: Ideally, the participant would submit a claim against the determination that the order is qualified. That would freeze the benefit pending resolution. Meanwhile the the participant and former spouse need to get their acts together to submit an order modifying the original one to provide what "should now" be the correct outcome. This would be done in the context of a friendly proceeding under the  plan's claims procedures.  The administrator needs to tread carefully because the administrator cannot push a resolution based on what the participant now says is desired by both. The administrator must be neutral in the process, but can be accommodating to the parties' reversal of the original filing under the claims procedures while carefully observing the formalities as long as the resolution is consensual. The problem is that the parties are not going to be able to pull it off the easy way and are unlikely to find a lawyer who can navigate the route described. And the state court will not be amused.

I appreciate the advice.  I have a couple follow ups.

• When it comes to potentially freezing the AP's benefit -- we would freeze the Participant's benefit if we were told a QDRO was forthcoming that will affect the Participant's benefit; can't we similarly freeze the AP's benefit if we are told a QDRO is forthcoming that will affect the AP's benefit?  It certainly is possible that the original QDRO was a mistake that needs to be fixed, but that the AP (having already been awarded a portion of the Participant's benefit to which she isn't actually entitled) will not cooperate.
• Can an AP's awarded benefit be subject to a QDRO?  In other words, instead of amending the original QDRO to say it is null and void, could the Participant get a QDRO that awards him the benefit that is now with the ex-spouse?

I cannot grasp the idea that a QDRO that likely:

• was drafted by two different attorneys, each representing separate parties,
• was signed by both parties,
• was reviewed and approved by the Plan Administrator, and
• was approved and signed by the court under a process that extended over a fair amount of time
• was a "mistake".

With the approved QDRO in hand, I don't see how the participant has any standing with respect to the spouse's awarded benefit.

I wouldn't do anything to impede the spouse from exercising her rights to her benefits without, at the very least, communicating with her.  I also would want all parties - the participant, the spouse and anyone else involved - to communicate in writing.

Before doing (or even considering doing) anything, a plan’s administrator might reread its ERISA § 206(d)(3)(G)(i)(I) DRO procedures and its ERISA § 503 claims procedures.

If either procedure does not state enough guidance about how the administrator should handle the situation, the administrator, with its lawyer’s advice, might evaluate whether to revise one or both procedures.

Yeah, all the advice above.  

Just a hunch, Spidey-sense is tingling for ALL of the above commentators.  Me too.  It should for you as well.  Something is not right.

4 hours ago, Paul I said:

I cannot grasp the idea that a QDRO that likely:

• was drafted by two different attorneys, each representing separate parties,
• was signed by both parties,
• was reviewed and approved by the Plan Administrator, and
• was approved and signed by the court under a process that extended over a fair amount of time
• was a "mistake".

With the approved QDRO in hand, I don't see how the participant has any standing with respect to the spouse's awarded benefit.

I wouldn't do anything to impede the spouse from exercising her rights to her benefits without, at the very least, communicating with her.  I also would want all parties - the participant, the spouse and anyone else involved - to communicate in writing.

 

Counterpoint: As someone that has knowledge of a participant who had their ERISA-qualified retirement plan (improperly) attached to satisfy a money judgment via a ‘valid QDRO’ which was signed by a family court judge, I can attest as to *exactly* how something like this could happen, especially when the presumption of correctness dissuades the plan administrator from exercising their fiduciary duty with respect to the participant, including ignoring the very advice they received from this board.  

Biased family courts are a thing. Unethical attorneys are a thing. Fraud is a thing. The presumption of correctness that attaches to a signed court order allows them all to thrive.

A court’s order might be incorrect, or otherwise made under a mistake of fact or a mistake of law.

But if a participant or other domestic-relations litigant thinks a court’s order is incorrect, one’s remedies are in the courts.

An ERISA-governed retirement plan’s administrator does not evaluate whether a court’s order is fair to the participant, or fair to the would-be alternate payee.

Rather, an administrator checks whether a writing submitted as a domestic-relations order seems to be a court’s order, and evaluates whether in form the order specifies a division that can be accomplished within the plan’s provisions (and states no command contrary to the plan’s provisions).

A plan’s administrator might have some fiduciary responsibility to act prudently in deciding whether a submitted writing is or is not a QDRO. But that responsibility does not include considering whether a State or Tribal court’s proceeding was fair to that proceeding’s litigants.

If you are the Plan Administrator and you have "qualified" the DRO, thereby making it a QDRO, then you should do nothing until you receive an Amended DRO from the Court.  It is not your job as Plan Administrator to look behind the QDRO.  See attached DoL Advisory Opinions.  And it is not prudent or legal to take any actions not authorized by the QDRO based on the agreement of parties unless that agreement is set forth in an Amended QDRO.

It might be possible for the court to order that the payments, if they are in pay status, be deposited into the Registry of the Court, or if your attorney is concerned he/she can file an Interpleader action asking the Court to rule on the dispute.  But you haven't set forth the nature of the dispute or the possible dispute.    

It is not clear if you desire is to vacate the QDRO or to amend it. If you are going to vacate it, there is no reason to wait.  Submit an appropriate Order by Consent ASAP and be done with it.  Why would you want to "lock in" the benefit for any period of time. The QDRO is already "locked in" because you have Qualified it.  The Plan Administrator needs to follow the terms of the QDRO until ordered otherwise. 

You need to be more detailed about the status of the case and the timeline.  Has the divorce judgment been entered?  Was the QDRO entered after the divorce judgment was entered?  Had the Participant retired prior to the divorce, in which event ERISA would have required a QJSA and a QPSA and at the happening of the divorce that election would have been locked it and the validity of a separate interest allocation would be in doubt?  If the Participant is in pay status and the Alternate Payee is not, or vice versa, who benefits are you freezing?  If you plan to submit a shared interest QDRO, will that even be possible if the separate interest QDRO is in place or in place and in pay status to one or both of the parties.    

For what reason should it "never have been filed"?  What exactly is the problem?  You need to be specific.  Is sounds like the Participant has buyer's remorse.   

And you need to be careful of matters that can occur unexpectedly and cause problems.  Like the death of the Participant, or the Participant retiring and entering pay status if he not already in pay status, or the Participant terminating his employment but deferring retirement, or the Participant remarrying and then retiring at a time after the separate interest QDRO is vacated but before a new QDRO is submitted and approved, in which sequence of events the Participant's new spouse will vest in the survivor annuity benefit and the former spouse will be SOL.

More details needed. 

Keep in mind that in all of these cases you have to deal with Federal laws and regulations, state law and regulations that are  normally preempted by Federal law, the written or dictated and transcribed agreement of the parties if there is one, the divorce judgment or the divorce judgment incorporating and/or not merging the agreement of the parties, the QDRO and the Plan documents.  Assume nothing.    

David

Advisory Opinion 1992-17A - duty of Plan Admin.pdf Advisory Opinion 1999-13A _ U.S - Sham Divorces.pdf

23 hours ago, ERISA-Bubs said:

Assuming she has not begun her benefit, can we simply have them provide an amended QDRO, reversing everything?

I would say yes.

23 hours ago, ERISA-Bubs said:

In the meantime, is it okay practice to lock her benefit until we can get it settled?  (I realize this would only be necessary if she thinks she is entitled to the benefit, but we just don't know yet).

I would want to have all of the facts before taking that action.

1 hour ago, Peter Gulia said:

But if a participant or other domestic-relations litigant thinks a court’s order is incorrect, one’s remedies are in the courts.

Absolutely agree with that.

I agree that the remedy is with the state/tribal court and if said court issued an amended QDRO to vacate the prior QDRO and restore participant's benefit to the full undivided amount then the plan would be able to work with that.  Agree the plan cannot look past the QDRO itself, and in simple terms, if the order is a Domestic Relations Order issued by a state/tribal court and such DRO rises to the level of a QDRO then it's a QDRO.  I draft amended QDROs to vacate a prior QDRO often and so far it has never been as a result of attempted fraud on behalf of the participant.  Great reason why in CA the QDRO must be a stipulation first and only after the court approves a Request For Order (RFO) would they permit a QDRO to be entered without all parties signature.

Memo to Wacko in Winnebago: 

One of my favorite cases is Brown v. Continental Airlines, Inc., 647 F. 3d 221 (5th Cir., 2011) -
https://scholar.google.com/scholar_case?case=4019345202025914766&q=brown+v.+continental+airlines&hl=en&as_sdt=20000003

Continental alleged that a number of pilots and their spouses obtained "sham" divorces for the purpose of obtaining lump sum pension distributions from the Continental Pilots Retirement Plan that they otherwise could not have received without the pilots' separating from their employment with Continental.  The pilots were allegedly acting out of concern about the financial stability of Continental and the fear that the Plan might be turned over to the PBGC and that their retirement benefits would be substantially reduced.  By getting divorced, the pilots were able to obtain QDROs from state courts that assigned 100% (or, in one instance, 90%) of the pilots' pension benefits to their respective former spouses.  The Plan provides that, upon divorce, if the pilot is at least 50 years old (as all the pilots in this case were), a former spouse to whom pension benefits are assigned can elect to receive those benefits in a lump sum even though the pilot continues to work at Continental.  The former spouses presented the QDROs to Continental and requested payment of lump-sum pension benefits.  After the former spouses received the benefits, the couples remarried.

 Continental sought to obtain restitution under ERISA Section 502(a)(3).  The Court of Appeals noted that ERISA § 206(d)(3) limits the QDRO qualification determination to whether the state court decree calls for benefit payments outside the terms of the Plan. It rejected Continental’s expanded reading of § 206, concluding that plan administrators may not question the good faith intent of Participants submitting QDROs for qualification. 

Beyond that, 26 USC 414(p)(1)(B) provides:

“(B) Domestic relations order - 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)."

I don't believe any Code provision requires that the "marital property rights" requiring the transfer of pension or retirement benefits must relate only to those benefits themselves.  I have had cases where one party dissipated assets and the only way to make the other party whole was to give her a larger share of the pension and retirement benefits.  I had another case where the Participant repeatedly perjured himself on the stand and the judge punished him by giving my client 60% of his GM pension.  I have had people trade off pension and retirement benefit for equity in the house.  And in Maryland and I think in most states the trial judge has the power to award as much or as little as he/she deems the be "equitable".  There is no presumption of 50/50.  There is no requirement that the court recognize and adjust for the Participant's premarital and therefore non-marital portion of his/her benefits.    

On top of all of this, the fact that pension and retirement benefits can be garnished/attached via a QDRO for alimony or child support is more evidence that the parties can agree how much of these benefits will be transferred from the Participant to the Alternate Payee and how that amount will be computed.  Sometimes the terminal date for the accrual of benefits if the date of the parties separation, or it can be the date of the divorce, or it can be any arbitrary date the parties agree upon. 

The Brown v. Continental case and the DoL Advisory opinions are evidence that this is a "nunya" situation.  Nuya business Mr. Administrator.   

The Plan Administrator has a fiduciary duty toward both parties, and part of that means not interfering with their deal.   For more reading in the importance of the Plan Administrator not looking behind that they have in front of them.

Read Kari E.  Kennedy, Executrix v.  Plan Administrator for Dupont Savings and Investment Plan, 129 S.Ct. 865, 555 U.S. 285 (2009) which you can find at -
https://scholar.google.com/scholar_case?case=16253581861885772265&q=Kari+E.++Kennedy,+Executrix+v.++Plan+Administrator+for+Dupont+Savings+and+Investment+Plan,+129+S.Ct.+865+(2009)&hl=en&as_sdt=20000003

and PaineWebber v.  East, 363 Md.  408, 768 A.2d 1029 (2001) - https://scholar.google.com/scholar_case?case=14624602948014812254&q=painewebber+v.+east&hl=en&as_sdt=4,83,96,109,124,146,159,290,291,292,308,309,312,313,353,354,355,371,372,375,376

David 
 

On 10/5/2023 at 10:15 AM, ERISA-Bubs said:

can't we similarly freeze the AP's benefit if we are told a QDRO is forthcoming that will affect the AP's benefit?

The answer I'll give here is what I think is the safe one: you can do so if the plan document or the plan's written QDRO or other administrative procedures say that's what will be done if you receive that sort of notification. I would not advise a fiduciary to delay or deny a lawful claim under a DRO that they've already qualified just based on "being told" something might be coming that changes it.