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Death before QDROs

Miletello v. RMR Mech., Inc., 921 F.3d 493 (5th Cir. 2019)

(a) Facts: Husband and wife were engaged in divorce proceedings. A settlement agreement awarded to the wife $500,000 of the funds in the husband’s 401(k) plan.

Before the husband complied with the order, he died. Two days later, the state court incorporated the settlement into a court order. Fifteen months later, the state court entered a QDRO ordering the plan to pay the ex-wife the $500,000.

The second wife sued the plan administrator in federal court to recover the $500,000. The plan administrator interpleaded the funds.

(b) Issue: Who is entitled to the $500,000?

(c) Answer to Issue: The ex-wife.

(d) Summary of Rationale: The husband’s second wife argued that the state court could not enter a QDRO after the husband’s death. She cited Rivers v. Central & South West Corp., 186 F.3d 681 (5th Cir. 1999). But the court held that the law had changed since Rivers:

Since Rivers was decided, Congress has modified ERISA to make “clear that a QDRO will not fail solely because of the time at which it [was] issued.” Yale New Haven Hosp. v. Nicholls, 788 F.3d 79, 85 (2d Cir. 2015) (citing Pension Protection Act of 2006, Pub. L. No. 109 280, § 1001, 120 Stat. 780 (2006)); see also 29 C.F.R. § 2530.206(c)(2) (stating that an “order does not fail to be treated as a QDRO solely because it is issued after the death of the Participant . . . even if no order [was] issued before the Participant’s death”). “The QDRO provisions of ERISA do not suggest that [the former spouse] has no interest in the plans until she obtains a QDRO, they merely prevent her from enforcing her interest until the QDRO is obtained.” Nicholls, 788 F.3d at 86 (alteration in original) (quoting In re Gendreau, 122 F.3d 815, 818 (9th Cir. 1997) (emphasis omitted)). We thus reject Pam’s argument that the January 18, 2017 QDRO is insufficient.

Miletello, 921 F.3d at 497.

Observation: As the cases cited in the quoted passage suggest, Miletello is the majority rule; most circuits will enforce a QDRO entered after the death and/or remarriage of a spouse. But this result is not uniform. The Third Circuit in particular continues to hold that QDROs cannot be entered after death. Richardson-Roy v. Johnson, 657 F. App’x 113, 114 (3d Cir. 2016), reaff’g Samaroo v. Samaroo, 193 F.3d 185, 190 (3d Cir. 1999).

Whenever possible, it is critical that state court orders dividing retirement benefits be entered as QDROs. Every day of delay between the division of benefits and the entry of a QDRO increases the risk that unforeseen events will frustrate the intended division.