An appeals court has overturned parts of a verdict in a case in which a deceased worker’s retirement plan assets were sought by both his surviving spouse and an ex-spouse.
The appeals court determined posthumous “nunc pro tunc orders” filed by the ex-spouse of a retirement plan participant in Connecticut are valid qualified domestic relations orders (QDROs)—and thus have sufficient standing to direct the flow of the deceased man’s retirement plan assets. The ruling overturned an earlier district court decision which determined incorrectly that a divorce settlement agreement between the man and the ex-spouse qualified as a QDRO for all four retirement plans the man participated in.
The practical outcome of the case after the appellate ruling is much the same: the man’s ex-spouse is entitled to most of his retirement plan assets, due to the QDROs. However, the appellate court’s decision determined that a divorce settlement agreement could not be relied upon to direct the man’s posthumous retirement plan distributions—essentially because the agreement does not meet the requirements set out under the Employee Retirement Income Security Act and the Retirement Equity Act of 1984.
Instead, only the nunc pro tunc orders the ex-spouse filed after his death carry enough weight to give her a valid claim on the assets—and only for three of the four plans he participated in. This outcome is despite the fact that the man’s surviving spouse was named as the beneficiary in various plan documents at the time of his death.
NEXT: Avoiding QDRO Mishaps
The complicated decision was handed down by the United States Court of Appeals for the Second Circuit, following an initial trial before the U.S. District Court for the District of Connecticut. It’s yet another case that shows how important QDRO orders can be in determining posthumous retirement plan distributions—and how important it is for plan sponsors and advisers to ensure participants are avoiding critical mistakes when developing or filing QDROs.
While the divorce settlement agreement was negotiated and agreed upon by the man and his ex-spouse, the appellate court deemed it “does not constitute a QDRO because the agreement fails to comply with the requirements of 29 U.S.C. § 1056(d)(3)(C).”
The appellate judges concluded, however, that the nunc pro tunc orders do constitute valid QDROs that assign funds to the ex-spouse from the three retirement and pension plans specifically named in the orders.
“But because the nunc pro tunc orders do not clearly specify the fourth plan, we conclude that the orders do not assign funds from that plan,” the decision notes.
The full text of the decision is here.
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