Yale-New Haven v. Nicholls, 788 F.3d 79 (2d Cir. 2015)
(a) Facts: A husband and wife were divorced in Connecticut in 2008. The divorce decree incorporated a settlement agreement, which provided that the husband would transfer to the wife half of the marital share of his retirement benefits. No QDRO was entered to enforce this language, and the husband did not make the required transfer to the wife.
The husband remarried, and then died, leaving his second wife as survivor beneficiary of all his pension plans. After the husband’s death, the Connecticut state court issued a series of orders nunc pro tunc, purporting to be QDROs, requiring payment of the promised benefits to the first wife.Both wives asserted competing claims to the benefits, and the plan filed an interpleader action. The District Court held that the first wife was entitled to half of the marital share of the benefits, finding that the divorce decree met the requirements for a valid QDRO.
(b) Issue: Is the first wife entitled to half of the marital share of the husband’s retirement benefits?
(c) Answer to Issue: Yes.
(d) Summary of Rationale: To constitute a QDRO, a state order must provide a mailing address for the alternate payee and state the name of each plan at issue. The district court erred in treating the divorce decree as a QDRO.
The issue then became whether the orders entered nunc pro tunc, after the husband’s death, were valid QDROs. The court held that a valid QDRO can be issued after death. See, e.g., Patton v. Denver Post Corp., 326 F.3d 1148, 1153-54 (10th Cir.2003); Trs. of Dirs. Guild of Am.–Producer Pension Benefits Plans v. Tise, 234 F.3d 415, 421-23 (9th Cir.2000).
The court expressly relied upon the Pension Protection Act of 2006, which states that “a domestic relations order otherwise meeting the requirements to be a qualified domestic relations order . . . shall not fail to be treated as a qualified domestic relations order solely because . . . of the time at which it is issued.” Pub. L. No. 109-280, § 1001, 120 Stat. 780 (2006) (paragraph break omitted).
A dissenting opinion argued that the benefits at issue vested irrevocably in the second wife when the husband died. The court disagreed. The nunc pro tunc orders were effective as of a prior date, and changed ownership of the benefits retroactively to a date before the husband died.
- Yale-New Haven Hospital is a textbook case showing why broad ERISA preemption is bad policy. The husband clearly agreed to give the first wife a portion of his retirement benefits. That agreement clearly predated the second marriage. There is no policy reason why the first wife should lose her rights, merely because the husband remarried and died before entry of a QDRO, especially when a QDRO has been entered nunc pro tunc.
- The second marriage cannot give the second spouse rights that a state court order had already taken away from the employee. To the extent that the second spouse is ignorant, the fault lies with the employee, not with the first spouse.
- There are valid reasons why obtaining QDROs is a difficult process, and a certain amount of delay is inevitable. The practical effect of the Samaroo approach is to impose an arbitrary penalty upon litigants who were unable to obtain a QDRO immediately, through no fault of their own.
- Nevertheless: It is foreseeable that the sufficiency of a QDRO may be presented in a circuit that follows the minority Samaroo position.The Supreme Court might resolve the circuit court split on this issue by agreeing with Samaroo. Federal judges, who have no experience actually litigating divorce cases, may have difficulty understanding why a QDRO was not obtained immediately after entry of the decree.
- Therefore, it is critically important to have QDROs entered by state judges as soon after divorce as possible. Every day of delay between divorce and entry of the QDRO is a day on which the owning spouse can remarry and die. Many federal judges believe that compliance with the technical requirements of ERISA is more important than compliance with state court orders. The preferred practice is to have the state judge sign the QDRO simultaneously with the divorce decree. Where delay is inevitable, make the delay as short as possible.