Pension-Splitting QDRO Challenge Denied

>Eva and Joseph Cerevka, after 37 years of marriage, decided to divorce in 1999. In September 2001, they met to divide assets, and agreed to split their two pension plans – a Keogh plan and a 401(k) – in half, with a set distribution date of August 31, 2001. As of October 2000, the value of the plans was $1.6 million; however, the value declined to $1.2 million by June, 2001, according to BNA.

>In March, 2003, Mrs. Cerevka received her share, but due to the declining stock market, Mr. Cerevka received $242,000 less than his former wife had. Mr. Cerevka filed suit, claiming that he and his former spouse should split the losses evenly. A lower court declined his petition and he appealed.

>The appeals court affirmed the lower court’s decision, finding that the QDRO gave Mrs. Cerevka 50% of the plan assets as of August 31, 2001. It ruled that the QDRO did not explicitly state that any losses to the value of the plans must be incurred evenly by both parties. It ruled further that there was evidence that Mrs. Cerevka’s payout value was meant to be fixed as of that date, leaving her former spouse with the burden of bearing any future losses due to market fluctuations.

>Mr. Cerevka had also claimed that the QDRO violated the Employee Retirement Income Security Act (ERISA) because a plan administrator should have notified him that he would carry the burden of any losses. The court dismissed this claim. The court also dismissed his claim that his attorney could not bind him to the QDRO.