In the case of Hopkins v. AT&T Global Information Solutions Co., the U.S. District Court ruled on cross-motions for summary judgment. The main issue in this matter was regarding the award of surviving spouse benefits to a former spouse rather than a current spouse.
Hopkins was married to her husband from 1960 through 1986. As part of their divorce, an order was entered awarding Hopkins alimony and allowing her ex-husband to keep his pension benefits. He remarried and then retired a few years later in 1993 and became eligible for pension benefits through his employer, AT&T.
ERISA and REA
The Employee Retirement Income Security Act (ERISA) and the Retirement Equity Act (REA) deal with how retirement plans are managed and how benefits are distributed. REA, specifically, addresses issues regarding spousal rights in retirement and survivor benefits, while ERISA is often used for guidance on qualified domestic relations orders.
According to ERISA and REA, pension benefits, like Hopkins’ ex-husband’s, must usually be taken as a joint and surviving spouse annuity, which means Hopkins’ ex-husband would receive a fixed income for the rest of his life, and his spouse would receive 50% of that income if she lived longer than him.
Hopkins’ Petition for Modification of the Divorce Order
Hopkins’ ex-husband had significant arrears in his alimony payments, and in 1994, she filed a petition for modification. As a result of this petition, the state court amended the order to make Hopkins an alternate payee of her ex-husband’s pension plan. She was to receive $433.33 per month from his pension benefit. The amended order also stated that Hopkins should be treated as the surviving spouse for the purposes of the surviving spouse benefit rather than her husband’s current wife.
Do Changes to Divorce Orders Qualify as QDROs?
A Qualified Domestic Relations Order (QDRO) is required to transfer some retirement accounts or benefits, or portions thereof, to a spouse in a divorce. ERISA has strict requirements for what qualifies as a QDRO and when one is needed. If an order assigns an alternate payee with the right to receive any portion of benefits payable to the participant of a plan, it may be considered a QDRO. In this case, the amended order granted Hopkins an interest in the surviving spouse benefit, which was not a payable benefit of her ex-husband’s but rather of his current wife. Therefore, the state court’s order could not divest the current wife’s interest to Hopkins because she was a beneficiary of the pension plan, not a participant.
The U.S. District Court determined that a state court’s amended order requiring a former spouse to be designated as the surviving spouse for an ERISA-qualified pension does not qualify as a QDRO if entered after the surviving spouse benefit has already vested in another beneficiary.
Additionally, the order was not a QDRO because it could require AT&T to provide increased benefits. This is because when Hopkins’ ex-husband retired, the amount of the surviving spouse annuity was based on his age and his wife’s age. If Hopkins were younger than her ex-husband’s new wife, AT&T would be required to pay increased benefits.