Posthumous QDRO – Is it Allowed?
The scenario is easy to picture, parties are divorced and a QDRO is needed to divide the participant’s account. They don’t do the QDRO right away, and the alternate payee thinks about their benefit upon hearing the news that the participant died. Can they still get that benefit, or are they out of luck?
The answer hinges on two major case-specific facts, what retirement plan should have been divided, and where did the divorce happen?
The retirement plan in question is important because the first question to ask is whether the plan is governed by the Employee Retirement Income Security Act (“ERISA”). If it is not, then they can more easily make up their own rules, and the attorney’s considerations are focused more on their state court’s willingness to accept a posthumous QDRO and the plan’s willingness to accept it. These will vary enormously in their procedures, so it is best to assume that each plan is different and to do fresh research any time this might come up.
The jurisdiction of the divorce is important because ERISA is a federal law. The circuits are clashing as to whether they will enforce posthumous QDROs and if so, for how long after the participants death. The circuit positions are described below. There are a few circuits that have not yet weighed in on the issue, attorneys practicing in those areas will have to check and see if their state has any precedent.
Minority Opinion
The First and Fourth Circuits are in the minority by rejecting posthumous QDROs. Their argument is based on the plan’s future stability and need to know the benefits payable with respect to each participant as of the date of the participant’s death. Posthumous QDROs may require a plan to pay benefit greater than those actuarily available to the participant and the participant’s survivors, which would be a violation of ERISA and threaten the viability of the plan in the long term.
The First Circuit’s opinion on the issue is per curiam, and it simply refused to enforce a posthumous QDRO due to its rejection by the plan. The First Circuit specifically states that the decision does not determine the question if it would enforce an otherwise proper posthumous QDRO. Garcia-Tatupu v. Bell, 747 Fed. Appx. 873 (2019), affirming lower court decision Garcia-Tatupu v. Bell, 296 F. Supp. 3d, 407 (D. Mass, 2017).
The Fourth Circuit’s opinion is specifically about survivor benefits for a pension plan, noting that surviving spouse benefits vest in the participant’s surviving spouse on the date of the participant’s retirement. Part of this is for plan administration, in that the plan must calculate the participant’s payment on an actuarial basis, therefore it needs to know the identity and life expectancy of the surviving spouse when they begin to make payments. Hopkins v AT&T Global Info. Solutions Co., 105 F.3d 153 (1997). While the benefit in question is the surviving spouse benefit, this is what is described as the “post-retirement survivor benefit” in most divorces, and in plans governed by ERISA may be transferred to the former spouse (from a future surviving spouse) via a QDRO.
Majority Opinion
The Second, Third, Fifth, Ninth, and Tenth Circuits allow for posthumous QDROs, arguing largely that it will not be rejected simply because of the time it was issued, although there is some difference within the circuits there. Specifically, some of these circuits take a view that within the eighteen-month period prescribed by ERISA to review a QDRO and segregate the alternate payee’s benefit any QDRO is timely. Patton v. Denver Post Corp., 326 F.3d 1148, 1151 (2003). Patton states that this is because ERISA clearly allows for revised QDROs to be submitted within the eighteen-month period, so too can new Orders be accepted because payments during the period can be retroactive.
In this Tenth Circuit opinion, Patton also makes clear that no notice to the Plan would be required prior to the participant’s death – whether by notice of divorce, marriage, or otherwise.
Alternatively, they state that because a QDRO is the key to enforcing an otherwise valid interest in a retirement plan, “there is no conceptual reason why a QDRO must be obtained before the plan participant’s benefits become payable on account of his retirement or death.” Trs. of the Dirs. Guild of America-Producer Pension Benefits Plans v. Tise, 234 F.3d 415, 421 (2000).
Circuits yet to opine on the issue: Six, Seven, Eleven, and Twelve
The cases discussed herein are largely with respect to pension plans and survivor benefits. The reason for this is simple – when the retirement asset at issue is a defined contribution plan (ie: 401k, 403b, TSP, etc.) the plan will make a payment to the beneficiary upon receiving notice of the participant’s death. At such time, the plan has no additional funds available to pay to an alternate payee should the plan receive a QDRO after such payment is made. Therefore, any enforcement action by the alternate payee would more properly be directed at the beneficiary rather than the plan.
Note: some cases cited may not be published opinions but are provided for information and research purposes.
If you need a QDRO prepared or have questions about specific to this QDRO topic, please contact our office at 240-396-4373 to discuss what your specific case might need.
