Dividing a Pension in Divorce: The Importance of QDRO Due Diligence

Although pensions are starting to fade away as a prevalent form of retirement benefit, they still feature prominently in many divorce proceedings between 50-something spouses. This post addresses the importance of perfecting a retirement asset property division by completing the necessary paperwork known as a QDRO whenever pensions are involved.

This blogger served as the personal representative of an estate involved in a recently decided federal lawsuit. The lawsuit featured surviving spouse benefits to which a long-divorced spouse may have been entitled. I was court-appointed to serve as an estate fiduciary in the dispute between the decedent husband’s former wife and his widow. 

The probate and the federal cases are interesting as they illustrate how a failure to diligently follow-through with legal papers can erase a benefit or a component of a property settlement to which a divorced party is entitled.

The conflict in these cases arose when Randy and Vickie Gray’s marriage ended in divorce after 25-years of marriage. A long-time DTE Energy employee, Randy had a pension, annuities, and other retirement benefits; Vickie was awarded 50% of the marital portion of the pension along with surviving spouse benefits as part of the property settlement in the divorce. 

Randy remarried shortly following the divorce. For several years following their divorce, neither Randy nor his ex-wife Vickie bothered to complete a specialized divorce order known as a Qualified Domestic Relations Order, or QDRO. The QDRO is necessary to complete the process of dividing retirement assets. Because retirement plans such as pensions and qualified savings accounts involve federal employment laws, these specialized orders are used in divorce proceedings to properly divide retirement assets.

In the case of the Grays, two things happened to thwart the intent of the parties as expressed in their divorce decree. First, Randy and his new wife Joy submitted paperwork assigning the surviving spouse benefits to Joy rather than his former wife Vickie, as contemplated in their judgment of divorce. The paperwork submitted to the pension plan also failed to disclose that Randy was divorced. Second, both Randy and Vicki neglected to timely prepare and file a QDRO that was required to perfect Vickie’s interest in her former Husband’s pension.

By the time the divorced couple completed and submitted their QDRO to the DTE plan administrator to at least divide the marital portion of the pension, Randy had been receiving his pension payments for several years. Vicki began receiving her share of Randy’s pension until his death a few years later. 

Randy’s death brought the issue of surviving spouse benefits into play. The paperwork submitted by Randy and his new wife falsely asserted that Randy had never been through a divorce and did not disclose the property interest [i.e. surviving spouse benefits] of his former wife. Of note, Randy was under a guardianship and conservatorship at the time the paperwork was submitted to the plan.

In the Oakland County Probate Court, the parties worked together to acknowledge the error in the paperwork initially submitted to the pension plan administrator. This produced a probate court order that was submitted to the plan so that Vicki could begin receiving her surviving spouse benefits.  

The probate court order was rejected by the plan. Characterizing the previously submitted paperwork as fraudulent rather than an “error”, the plan focused on what it deemed a deliberate omission that the participant was ever involved in a divorce. The plan also -successfully- asserted in the federal court case that it had never received any information from either party that the participant had been involved in a divorce until years after the participant had been in pay status. 

According to plan rules and regulations, the only benefits available to Randy’s divorced wife were those benefits she received during the participant’s lifetime; the surviving spouse benefits could not be recouped due to her failure to submit a timely QDRO. 

When our law firm addresses these issues in divorce proceedings, we make sure that our clients have a firm plan to prepare and submit a QDRO that comports with the terms of the judgment of divorce. Sometimes, litigants research the Internet to locate a company’s sample forms; other times, litigants, weary of court proceedings and lawyers, attempt to do-it-yourself. 

Such common missteps are frequently fatal to the preparation and submission to court of a proper QDRO. In this process, the plan administrator must approve the QDRO as drafted. We usually seek this approval prior to submitting the QDRO to the family court. Because what is the sense of having a court enter an order that the plan administrator ultimately will reject. 

These and other complexities to the retirement asset division process make it essential to have competent legal representation from start to finish in a divorce proceeding. Our law firm begins the QDRO process during the divorce, not as an afterthought once the divorce judgment is already entered. 

If you are contemplating divorce, our law firm offers a free legal consultation where we can obtain details about the retirement portion of a marital estate and begin to identify various options or features of an eventual property settlement. 

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