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 U.S. 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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