Under a qualified domestic relations order, or a “QDRO”, a plan participant’s benefit may be assigned to his spouse or other family member. But when does the domestic relations order “qualify”? The Court faced that question in Langston v. Wilson McShane Corporation, as Administrator for the Twin Cities Carpenters and Joiners Pension Fund, Nos. A10-2219, A11-683, A11-684 (Court of Appeals of Minnesota, 1/9/12)
In this case, Patricia Langston had obtained a 2005 domestic relations order (a “DRO”) from a state court to enforce her rights to a portion of the retirement benefits of her ex-husband, Gary, based on a 1993 judgment dissolving their marriage. Gary had remarried in 2001. In 2004, he retired, and began receiving benefit payments in the form of a joint and 50% survivor annuity with his extant spouse, Shelley, as the surviving beneficiary. Wilson McShane Corporation, the administrator of the plan at issue, determined that the DRO was not “qualified” under ERISA. Gary soon died and Shelley began receiving the 50% survivor’s annuity. Patricia sought a declaratory judgment against McShane, requiring it to treat the DRO as qualified and to pay benefits to her under it. A state court held that the DRO was qualified, and it awarded summary judgment to Patricia. The question for the Court of Appeals of Minnesota (the “Court”): was the state court correct in concluding that the DRO was “qualified”?
The Court noted that, for the DRO to “qualify”, it cannot, among other things, require the plan to provide benefits not available, or to provide increased benefits (citing 29 U.S.C. § 1056(d)(3)(D), a provision of ERISA). In this case, the benefits subject to the DRO, issued in 2005, had already irrevocably vested in Shelley upon Gary’s retirement in 2004, and were in pay status prior to the end of 2004. As such, the DRO would require the plan to provide a benefit no longer available, and to pay increased benefits because the Plan would have to both pay Shelly her 50% survivor’s annuity and pay Patricia the benefits awarded under the DRO. This would violate the ERISA rules in section 1056(d)(3)(D). Thus, the Court concluded that the DRO does not qualify and is not a QDRO, and it reversed the state court’s judgment.