In a divorce that includes a retirement plan, a domestic relations order (DRO) is issued by the state court to assign benefits from the employer to another person (usually the employee’s spouse, known as the alternate payee). The retirement plan that administers these benefits must receive this order. Certain federal requirements must be met and it is up to the plan to determine if the order meets them. If the order meets the requirements, it then becomes a Qualified Domestic Relations Order (QDRO). In the event that the order gets denied, the state court may modify the order to appease the plan’s objections. An appeal to a federal or state court may be made regarding the plan’s decision to qualify the DRO. The case below discusses an issue regarding a QDRO and if a wife is entitled to the benefits of their deceased ex-spouse.
Parsons v. Bd. of Trs. Boilermaker-Blacksmith Nat’l Pension Trust, 487 F. Supp. 3d 489 (S.D.W. Va. 2020), appeal dismissed (4th Cir. Jan. 21, 2021)
- Facts: In their divorce decree, Husband was awarded “all retirement benefits to which [husband] is presently entitled…as a result of past or present employment, with [wife] to be named sole beneficiary and entitled to receive the aforesaid benefits in the event of the death of [husband].” Husband’s employer was served with a copy of the divorce decree. A few years later, Husband died. The plan argued that the divorce decree was not a QDRO and so they refused to pay Wife the survivor benefits. When Wife filed an appeal, the employer agreed that the plan indeed was a QDRO, but it would only pay limited benefits. Wife then appealed a second time. The plan argued further that the decree naming Wife as “sole beneficiary” did not require them to treat her as Husband’s surviving spouse. Wife took the plan to federal court and sued them.
- Issue: Was the wife entitled to all of the husband’s remaining benefits under the plan?
- Rationale: ERISA does not require the alternate payee to be referred to as the “surviving spouse.” The court held that by listing the wife as “sole beneficiary” in the QDRO, this language did not bar her from receiving the benefits. The court put emphasis on the phrase “all retirement benefits” that was in the divorce decree. The court maintained that since the QDRO stated the wife was entitled to all of the benefits if the husband died, this included pension and death benefits since those were all of the benefits under the plan.
- Lessons and Observations: At first, the plan did not want to accept that the decree was indeed a QDRO. By the plan denying its acceptability and then changing their mind, it brings into question the integrity of the plan’s operations. While the courts here ruled in the wife’s favor, it is wise to have the language in the QDRO state the alternate payee as “surviving spouse” instead of just “sole beneficiary.” If the plan acts unreasonably, suing the plan is necessary as a last resort.