Dahl Aerospace Employees’ Ret. Plan of Aerospace Corp., 122 F. Supp. 3d 453 (E.D. Va. 2015)
Facts: A Virginia divorce decree, incorporating a settlement agreement, gave each spouse the option to elect survivor benefits under the retirement plan of the other. This provision was not immediately stated in a DRO or qualified by the plan.
The husband’s pension plan allowed him, upon retirement, to elect a 50%, 75%, or 100% survivor benefit.
The husband retired on July 31, 2014, 11 years after the divorce decree. He did not notify his former wife in advance, or give her any option to elect survivor benefits. Instead, he elected his current wife as 50% survivor beneficiary. He stated in his election that no outstanding court order required him to name another person as survivor beneficiary—a blatantly false statement.
Upon learning of the husband’s retirement, the former wife’s counsel prepared a draft DRO requiring the husband’s employer to act as if the husband had elected 100% survivor benefits for his former wife. The retirement plan refused to qualify this order, on the grounds that the husband had already elected a 50% benefit for his current wife and he was only permitted to name one survivor beneficiary.
The former wife sued the plan and the husband in federal court, seeking a declaratory judgment that the husband’s election of his current wife as survivor beneficiary was void for fraud, and that the plan was required to qualify an appropriate DRO naming the former wife as survivor beneficiary. The plan and the husband moved to dismiss the wife’s action.
Issue: Should the wife’s action be dismissed?
Answer to Issue: Yes.
Summary of Rationale: The plan argued that the wife lacked standing, because she was not an actual plan But a person with a claim to benefits is also entitled to sue the plan. The former wife had a colorable claim to benefits.
At the time the husband retired, there was no QDRO in effect limiting his choice of survivor beneficiary. Therefore, the former wife could prevail only by establishing that the husband’s survivor benefit election was void. She cited no case law holding that an election of survivor benefits is void if a false statement is made which defrauds a former spouse who has not yet obtained a QDRO. In the absence of such law, the court refused to hold that the survivor benefit election was void.
Because the former wife did not obtain a QDRO, the husband’s election of his current wife was enforceable under ERISA, even though the election violated a state court order.
Continue reading →