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Ensuring Survivor Benefits With Recent 9th Circuit Case

February 18th, 2012

In Carmona, participant retired with a joint and survivor annuity with spouse. He subsequently divorced that spouse, remarried and then died. The plan began paying survivor benefits to the former spouse pursuant to the joint and survivor annuity selected when participant retired. The participant’s widow attempted to obtain a share of former spouse’s survivor benefits via a QDRO. The 9th Circuit held that “a state DRO may not create an enforceable interest in surviving spouse benefits to an alternate payee after a participant’s retirement, because ordinarily [emphasis added] at retirement the surviving spouse’s interest irrevocably vests.” Id at 1004. But in footnote 13 to that holding the 9th Circuit clearly distinguished its holding from the situation when a former spouse had an existing interest in the pension that predated participant’s retirement. The Court stated as follows:

We say “ordinarily” because we recognize that there may be other situations, not present in this case, in which a contrary result may be appropriate. For example, it is possible that a former spouse could obtain a DRO prior to the annuity start date and present it to the plan, but the actual determination of whether the DRO is a QDRO might not be finalized prior to the date on which the benefit would normally become payable. See e.g., 29 U.S.C. §1056 (d)(3)(H). .

Id. at 1004.

COMMENTS: The above footnote 13 helps protect somewhat the ability of an alternate payee’s rights to survivor benefits so long as the plan is served with a domestic relations order (“DRO”) before participant retires. Also, in footnote 15, the court did not preclude the possibility of bringing an action to obtain benefits from a spouse or former spouse after funds had been distributed from the plan. But note that when a state court creates a constructive trust with the explicit purpose of avoiding ERISA rules, it must be preempted by ERISA. Carmona at 6696. .

Bottom line is make sure the Plan is served with a DRO before participant retires. .

Legal Disclaimer: This information is for general informational purposes only. It should not be construed as, and does not constitute, legal advice on any specific matter, nor does this article create an attorney-client relationship.