Compliance

Appellate Court Weighs In on Posthumous QDRO

Appeals court rules on the validity of certain posthumous qualified domestic relations orders, and whether divorce settlement agreements qualify as or supersede QDROs.

By John Manganaro editors@strategic-i.com | July 09, 2015
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An appeals court has overturned parts of a verdict in a case in which a deceased worker’s retirement plan assets were sought by both his surviving spouse and an ex-spouse.

The appeals court determined posthumous “nunc pro tunc orders” filed by the ex-spouse of a retirement plan participant in Connecticut are valid qualified domestic relations orders (QDROs)—and thus have sufficient standing to direct the flow of the deceased man’s retirement plan assets. The ruling overturned an earlier district court decision which determined incorrectly that a divorce settlement agreement between the man and the ex-spouse qualified as a QDRO for all four retirement plans the man participated in.

The practical outcome of the case after the appellate ruling is much the same: the man’s ex-spouse is entitled to most of his retirement plan assets, due to the QDROs. However, the appellate court’s decision determined that a divorce settlement agreement could not be relied upon to direct the man’s posthumous retirement plan distributions—essentially because the agreement does not meet the requirements set out under the Employee Retirement Income Security Act and the Retirement Equity Act of 1984.

Instead, only the nunc pro tunc orders the ex-spouse filed after his death carry enough weight to give her a valid claim on the assets—and only for three of the four plans he participated in. This outcome is despite the fact that the man’s surviving spouse was named as the beneficiary in various plan documents at the time of his death.

NEXT: Avoiding QDRO Mishaps