Author: Charles F. Fuller
Although our firm does not practice family law, representing individuals in divorces, adoptions or similar matters, we do practice in one very important area in that field. Due to our substantial experience with employee benefits and the Employee Retirement Income Security Act of 1974, as amended, (ERISA), we are often called upon to assist clients with Qualified Domestic Relations Orders (QDROs).
Our client, who I will call Ann, sought our assistance in protecting her rights to a portion of her ex-husband’s pension retirement benefit. Ann was married to Bill for over two decades. After Bill retired and began receiving pension benefits, they encountered marital difficulties leading to divorce. The parties live in a southwestern state, and through legal maneuverings by Bill’s attorneys, the state court held that Ann had given up her right to a survivor’s benefit of Bill’s pension retirement benefit. Ann did relinquish her right to receive a marital share of her former husband’s pension benefit during his lifetime in the Property Settlement Agreement between them. Bill’s employer subsequently went bankrupt. The bankruptcy employer’s pension plan was taken over by a federal agency, the Pension Benefit Guaranty Corporation (PBGC). The PBGC, in reviewing Bill’s pension file, determined that the state court order divesting Ann of her right to receive a survivor benefit in Bill’s pension and the state court’s entry of a QDRO in favor of Bill’s subsequent wife were invalid. The PBGC determined that Ann was the proper recipient of Bill’s pension benefit upon his death because the QDRO sought to provide a form of benefit not otherwise provided under the Plan; Ann’s survivor benefit irrevocably vested when the pension benefit was first paid to Bill and therefore was not waivable or assignable.
Bill initially brought suit against the PBGC in the United States District Court for the District of Columbia claiming PBGC had violated federal law. Subsequently, Ann was made a party to the litigation on the basis that she was an indispensable party. This allowed Ann to protect her own rights in the lawsuit. After Ann entered the case, Bill amended his complaint to add several state law claims against her.
Both Bill, on the one hand, and the PBGC and Ann on the other hand, moved for summary judgment in the trial court. The District Court agreed with the PBGC and Ann that Ann could not have waived her right to Bill’s survivor pension benefit through the state law QDRO because her benefits irrevocably vested after Bill began receiving benefits and therefore were not waivable or assignable. The trial court also dismissed the state law claims against Ann because ERISA, the federal statute governing pensions, preempted state law. Bill disagreed and appealed to the United States Court of Appeals for the District of Columbia.
In the appellate case, the PBGC was dismissed as a party, leaving Bill and Ann as parties to the appeal. We successfully argued to the Court of Appeals that the federal statute, ERISA, preempted the state law relied upon by Bill and invalidated the QDRO. The Court of Appeals agreed with our position. Further, we argued that contrary to the state court’s determination, Ann could not have waived her right to the survivor pension benefit through a QDRO because her benefits irrevocably vested upon Bill’s receipt of pension benefits and therefore Ann could not legally waive or assign those benefits to either Bill or his new wife. The Court of Appeals agreed with our position and ruled in favor of Ann. Bill did not seek to appeal the case to the United States Supreme Court, and therefore the Court of Appeals’ decision was final in favor of Ann.
The importance of Ann’s case, besides the substantial monetary benefit she may recover after Bill’s death, is that it is extremely important for a spouse to protect his/her rights to a former spouse’s pension benefit at the time of divorce. By obtaining a properly drafted and entered QDRO shortly after a divorce is finalized, a spouse can protect his/her federally protected rights without the resort to litigation. This was not done in Ann’s case. The litigation to prevent Ann from receiving her federally protected right to Bill’s pension benefit after his death was filed a year or two after the divorce. It wasn’t until more than a decade later that her rights were finally protected. Addressing this issue head on, close in time to the entry of the final divorce decree can avoid much heartache and expense. We are often called upon by clients to prepare QDRO’s to protect their rights to a former spouse’s pension. We would be happy to assist you should the need arise.