Posted on September 29, 2009 by Sandra C. Fava

DIVIDE THOSE RETIREMENT ASSETS

Most people are overwhelmed during the process of a divorce.  Stress and emotions run high, there are the added time constraints of the court and the daunting tasks of discovery, court mandated appearances and either a trial or coming to a final resolution.  When the judge signs off on the final judgment of divorce a great weight can be lifted and its easy to feel that the process is over.

Oftentimes, this is not the case.  What has been referred to as 'loose ends' can easily be overlooked and forgotten.  A perfect example is the finalization and submission of Qualified Domestic Relations Order ("QDRO") to plan administrators for the division of qualified and some times non-qualified retirement plans and benefits.  I have previously blogged on this issue.  To read those entries, click here and here.

So why am I telling you about this all important often missed step of the process again? Recently the Appellate Division issued another unpublished decision addressing this topic.  To read the opinion, click here.  In this case, husband's pension took over 10 years to be divided by way of QDRO to wife.  The delay it appears was caused by each party's failure to respond.  However, the husband retired in 2004 and began receiving his retirement benefits.  Despite knowing the wife was entitled to 1/2 of his benefits or some amount close thereto, he failed to notify her of his retirement and failed to provide her with any payment for her right to share in this asset.

The wife filed enforcement motions to get the QDRO for the pension finalized and eventually requested that husband be ordered to pay her her share of the retirement benefits he received retroactive to the date he began receiving his payments.  The trial court granted her request.

The husband appealed this decision claiming that he should not be held responsible for the delay as the wife was at fault.  The Appellate Division affirmed the trial court's ruling finding 1) the husband made no effort to tell the wife that he'd retired and was receiving benefits; and 2) in the absence of a QDRO, the husband had an obligation to either pay the wife or set aside sufficient funds to pay her until the matter was resolved by the court. 

Specifically, the Appellate Division reiterated the finding of the trial court that the QDRO is a means to allow the pension company to pay the wife directly.  The mere fact that a QDRO had not been finalized at the time when the husband began receiving his benefits did not excuse him from his obligations under the Judgment of Divorce or the parties' Settlement Agreement.

It is established under the laws of NJ that a part of a pension legally or beneficially acquired by either party during a marriage is subject to division by way of equitable distribution.  ERISA  (Employment Retirement Income Security Act) was passed to establish uniform national standards for pension plans.  The Retirement Equity Act, passed in 1984 created a statutory exemption to the anti-alienation provisions of the IRS and ERISA and requires pension plan administrators to honor a QDRO issued by a court.  These changes allowed a direct distribution to the non-participating spouse. 

Lesson to be learned: Get your QDRO's done!
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Posted on February 9, 2009 by Sandra C. Fava

GET YOUR QDRO'S DONE CONTINUED...

Several months ago, I posted a blog entry regarding the need to get Qualified Domestic Relations Orders (QDRO) done as shortly after or even before a divorce is finalized.  To read that entry, click here. 

Most recently, the US Supreme Court issued a decision, which only serves to strengthen the message of that blog.  In the recently reported matter of Kennedy v. Plan Administrator for Dupont Savings and Investment Plan, et al., decided January 26, 2009, the Supreme Court found that where an employee failed to change the beneficiary of their employer related retirement plan, i.e. 401(k), pension, etc. subsequent to the entry of a Final Judgment of Divorce, despite the clear terms of a Judgment of Divorce or Agreement between the parties, the Plan Administrator must divide the retirement asset in accord with the Plan documents, i.e. to whom the plan participant designated.

In this matter, the parties had been divorced for several years.  In their Agreement, the former Mrs. Kennedy waived her interest in Mr. Kennedy's Savings and Investment Plan.  After the divorce was finalized, Mr. Kennedy failed to change the beneficiary designation of this Plan to someone other than his former spouse.  Upon his death, his Plan benefits were paid to Mrs. Kennedy.  His estate requested that the funds be distributed to them but the Plan administrator, relying on Mr. Kennedy's designation form and the Plan documents, would not do so.

The matter was litigated up to the Supreme Court who found that Mrs. Kennedy did not waive or assign her interest in the Plan despite the terms of the parties Agreement.  The Court also found that Dupont's plan administrator acted correctly by enforcing a QDRO but also enforcing the plan documents. 

While it is important to make sure that QDRO's are completed either before or shortly after a divorce is finalized,  if there are retirement assets to divide and those assets fall under ERISA and require a QDRO, it is equally important to ensure that employee's participating in ERISA governed plans, by virtue of their employment, take whatever steps necessary to change their plan beneficiaries to avoid situations like the one above.

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