A Qualified Domestic Relations Order (QDRO) is an order that awards one person the right to receive some or all of another person’s retirement benefits. The person whose retirement account is being divided is known as the participant, and the person receiving the rights to the benefits is called the alternate payee. QDROs are common in divorces because retirement plans are often assets divided in equitable distribution or other distribution of property.
QDRO Requirements
The Employee Retirement Income Security Act (ERISA) regulates QDROs and outlines numerous requirements. Among them are the following:
An alternate payee must be a spouse, former spouse, child, or other dependent of the participant
- QDROs must contain the dollar amount or percentage of the benefit awarded to the alternate payee or include the method used to determine the amount or percentage.
- A QDRO cannot require a retirement plan to provide increased benefits or any other benefit not otherwise provided under the plan.
The timing of issuance of an order does not automatically disqualify a domestic relations order from being considered a QDRO. For example, an order issued after a plan participant’s death will still be a QDRO as long as it meets all the other requirements. What happens in cases when the alternate payee dies before a QDRO can be enforced? This can make distributing retirement benefits complicated, but there has been case law that addresses this scenario.
QDROs and Deceased Alternate Payees
In National City Corp. Non-Contributory Retirement Plan v. Ferrell, a federal case heard in the Northern District of West Virginia, an ex-wife was awarded rights to the entirety of her ex-husband’s pension plan but passed away before the QDRO was entered.
Barbara Ferrell was awarded 100% of her ex-husband Forrest Ferrell’s assets in his pension plan as part of their January 2002 divorce. In July 2003, Barbara passed away. At the time of her death, the divorce agreement had been entered, but the QDRO had not.
Forrest’s employer, National City Bank, argued that a QDRO could not be enforced after the alternate payee’s death. However, the U.S. District Court ruled that a posthumous QDRO can be enforced and noted that in this case, the QDRO was created long before Barbara died. Despite the QDRO being approved after her passing, the rights to the pension funds were already granted to Barbara in the divorce agreement.
Not every alternate payee will be entitled to posthumous QDRO benefits, but death does not automatically prohibit an order from being considered a QDRO. For guidance on financial assets in a separation or divorce, contact the experienced attorneys at Woodruff Family Law Group.