QDRO Advisory Report (TM)

Virginia

Posted January 25, 2009

Cusack v. Cusack, 2009 Va. App. Lexis 21

Focus: Valuation/Direct Payments

Comment: The appellate court held that retirement benefits should be valued “as of the date of the evidentiary hearing” pursuant to VA Code § 20-107.3(A). Therefore, payments from the husband’s, in pay status, military pension should commence at the date of the hearing and not before, as ordered by the trial court. To commence payments prior to the hearing date, a trial court should use a “dissipation of assets” analysis. The court also held that the husband may be ordered to make direct payments to the wife until the plan administrator accepts an appropriate court order.

Comment: Appellate court vacated a Domestic Relations Order that awarded the former spouse a survivor benefit that included benefits that were the separate property of the husband. The Arizona State Retirement System (“ASRS”) only permits a participant to designate one contingent annuitant. Thus, the award to the former spouse of the entire survivor benefit would preclude the husband from providing an annuity for a subsequent wife. The Court also held that Johnson, not Koelsch controls in situations involving pension benefits that have not matured. See Johnson v. Johnson, 638 P.2d 705 (Ariz.S.Ct. 1981); Koelsch v. Koelsch, 713 P.2d 1234 (Ariz.S.Ct. 1986).

Comment: The Court held that a separate civil action is required to establish co-tenant rights under 25-318 (B). A separate action prevents the action from being barred by res judicata principles. A separate civil action also does not “impair the finality of the dissolution decree.” Moreover, the holding supports the compelling policy interest favoring the finality of property settlement agreements.

Comment: Court held that A.R.S. § 25-318 (B) is inapplicable when a dissolution decree effectuates an explicit property settlement that disposes of all of the parties’ community assets. A.R.S. § 25-318 (B) provides that property not disposed of in a dissolution decree is thereafter owned by the former spouses as tenants in common. Court also held that Arizona’s revocation by divorce statute A.R.S. § 14-2804 can not be avoided by spousal inaction.

Comment: Trial court erred by failing to exercise its discretion in the division of the community retirement plan based upon equitable considerations. A trial court is not bound by a particular method of division, including the time-rule. Rather, a trial court must choose a method that will “achieve substantial justice” (citing In re Marriage Gowan, Cal.App.4th 80 (1997).

Comment: Court denied the former spouse from receiving a portion of disability pay the member received in lieu of his military pay. See Mansell v. Mansell, 490 U.S. 581(1989). A member may waive a portion of his retired pay to receive disability pay instead. Disability pay can not be assigned. Id. This case highlights the importance of using precise indemnification language that should be included in the decree to prevent this result.

Comment: Court required Member Former Husband to pay to 50% of his military pay directly to the Former Spouse pursuant to the parties divorce decree, even though there was no indemnification provision in the settlement agreement (distinguishing Scheidel, 4 P.3d 670 (Ct.App.2000) where the settlement agreement contained an indemnification clause for any actions or reductions caused by the member). The court relied on the principles of fairness and equity at arriving at its decision.

Comment: Court affirmed the district court by awarding survivor benefits in a post-decree assignment order even though the benefit was not addressed in the divorce decree. The court stated that survivor benefits are a valuable community asset (citing Irwin v. Irwin, 910 P.2d 342 (App. 1996). The Court’s ruling has little effect since the Office of Personnel Management rejected the wife’s claim for survivor benefits due to her failure to follow procedures pursuant to the Code of Federal Regulations. This case highlights the importance of retaining competent counsel familiar with federal retirement benefits.

Comment: Case involved a non-ERISA municipal police pension plan (not subject to a QDRO). The court reversed an award for alimony since the trial court failed to make an allocation between the retirement and disability portions of the pension. Only the retirement portion is subject to equitable distribution. Court also reversed the trial court for failing to make sufficient findings for an alimony award pursuant to FSS § 61.08(2).

Comment: Court held that the former spouse is entitled to DROP benefits when awarded an interest in the participant’s pension plan. Court certified the question to the Florida Supreme Court. See also Russell v. Russell, 922 So. 2d 1097 (4th DCA 2006)(affirming former wife’s interest in DROP).

Comment: Court vacated the entry of a QDRO since the former husband failed to receive a “notice of hearing” pursuant to Florida Rule of Civil Procedure 1.090; general notice of the hearing is insufficient. See also Butts v. Hegmann, 705 So. 2d 1007 (Fla. 4th DCA 1998) (holding that adequate notice is imperative when a QDRO is entered since it produces a final result).

Comment: Court held that a present value analysis of a defined benefit pension plan must be based on competent and substantial evidence, usually requiring expert testimony. Appellate court reversed the trial court for accepting a present value calculated by the former husband.

Comment: Appellate Court permitted the imposition of a constructive trust on the benefits received by the “new” wife of the Participant permitting the former spouse to receive a portion of the survivor benefits despite the statutory prohibition of R.C. 3105.86.

New Legislation: House Bill 98 impacts all five (5) of Ohio’s public retirement systems and is effective October 27, 2006. The bill provides additional protection for an alternate payee. The legislation permits an alternate payee to receive a joint and survivor annuity and COLAs, if awarded in the divorce decree. See newsletter for more information.

Kennedy v. Plan Adm’r for DuPont Sav. & Inv. Plan, 129 S. Ct. 865 (2009)

Comment: The United States Supreme Court held that ERISA imposes a statutory fiduciary duty upon the plan administrator. The duty imposed by ERISA is the duty to act in accordance with plan procedures in determining who is entitled to beneficiary status under the plan. Moreover, a plan administrator is required under the rule to disregard a waiver of benefits if that waiver conflicts with plan procedures. The Court also concluded that a waiver is not rendered invalid by ERISA’s anti-alienation provision.

Comment: The vesting of survivor benefits in divorce is an issue of first impression for the 9th Circuit. The 9th Circuit held that survivor benefits irrevocably vest in the participant’s spouse at the annuity starting date and may not be reassigned to a subsequent spouse via QDRO. The Court also held that a state law constructive trust cannot be used to contravene the dictates of ERISA.

Comment: The 3rd Circuit permitted the entry of a nunc pro tunc QDRO following the death of the Participant. The Court held that the parties’ divorce settlement agreement created a separate interest in the plan for the former wife, prior to the former husband’s demise. The court distinguished its holding in Samaroo. See Samaroo v. Samaroo, 193 F.3d 185 (3rd Cir. 1999). The court also retained supplemental jurisdiction over the malpractice claim against the former wife’s divorce attorney.