Pension & Benefits News 401(k) balance awarded to participant’s ex-wife pursuant to QDRO issued after his death
Tuesday, July 30, 2019

401(k) balance awarded to participant’s ex-wife pursuant to QDRO issued after his death

By Pension and Benefits Editorial Staff

The fact that a QDRO was not issued until after a participant’s death did not invalidate the QDRO or prevent his ex-wife from receiving it within the statutorily specified 18-month time period, according to the U.S. Court of Appeals in New Orleans (CA-5). In awarding the participant’s 401(k) balance to his ex-wife over his surviving widow, the court explained that, under governing ERISA regulations, a domestic relations order meeting ERISA’s requirements will not fail to be a QDRO solely because it is issued after the death of a participant.

QDRO reflecting divorce terms issued after remarried participant’s death. An employee participated in a 401(k) plan sponsored by RMR Mechanical. During his marriage, the participant designated his wife as the beneficiary of his account.

The couple divorced in January 2014. As part of the divorce, the participant and his former wife agreed to a community property divorce settlement, pursuant to which she would receive $500,000 of the funds in the 401(k) account, or the balance of the 401(k) account if it was less than $500,000. The divorce settlement was entered by the participant on April 20, 2015 and by his former wife on May 4, 2015.

The participant remarried in May 2014. Unfortunately, the participant died in a plane crash on October 26, 2015. On October 28, 2015, a state court entered a judgment of partition that incorporated the terms of the divorce settlement into the divorce decree.

In November 2016, the participant’s widow filed suit in federal court, claiming the 401(k) funds as the participant’s surviving spouse. While the dispute was pending resolution, RMR deposited the funds into the court registry.

On January 18, 2017, the state court entered a QDRO, pursuant to the divorce settlement, granting the participant’s former spouse $500,000 of his 401(k) funds. In August 2017, the state court issued an amended QDRO with a retroactive effective date of May 4, 2015 (the day the divorce settlement was executed).

The federal trial court granted summary judgment in favor of the former spouse, concluding that she had timely received a valid QDRO. The participant’s widow appealed.

QDRO status not determined by date of issuance. After initially noting that the ex-wife had received the QDRO within the 18-month time period specified in ERISA Sec. 206(d)(3)(H), the Fifth Circuit focused on the surviving widow’s contention that the January 18, 2017 QDRO was not valid because it post-dated the participant’s death. In rejecting the widow’s argument, the court explained that the governing rules under ERISA (implemented pursuant to a Congressional mandate expressed in the Pension Protection Act of 2006 (P.L. 109-280), Act Sec. 1001(1)) clearly state that a domestic relations order otherwise meeting ERISA’s QDRO requirements will not fail to be treated as a QDRO solely because of the time at which it is issued (ERISA Reg. 2530.206(c)). Examples provided in the regulations further clarify that a domestic relations order will not fail to be a QDRO because it is issued after the death of the participant (ERISA Reg. 2530.206(c)(2)). Accordingly, the January 18, 2017 QDRO was a valid QDRO and the former wife was entitled to $500,000 of the participant’s 401(k) funds.

SOURCE: Miletello v. RMR Mechanical Inc. (CA-5).

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