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Gail Inman-Campbell
Walker, Campbell & Campbell
Suite 201 Security Plaza
P.O. Box 1940
Harrison, Arkansas 72602-1940
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2000-09A
ERISA Sec. 206(d)(3)
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Dear Ms. Inman-Campbell:
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This is in response to your request for an advisory opinion under section
206(d)(3) of ERISA. You raise questions regarding the proper treatment of a
domestic relations order that assigns to an alternate payee a
“company-paid survivor benefit.” The terms of the affected pension plan
makes this company-paid survivor benefit payable only to a beneficiary
designated by the participant from within a limited class of individuals
(either the participant’s surviving spouse, the participant’s minor
child or children, or the participant’s parent or parents). According to
your representations, the survivor benefit in question is not the qualified
joint and survivor annuity (QJSA) benefit that is mandated by section 205 of
ERISA, but is provided by the plan in addition to the QJSA benefit.
Specifically, you ask whether an order requiring the company-paid survivor
benefit to be paid to the participant’s former spouse, who had been named
by the participant as the designated beneficiary under the plan prior to the
divorce and as of the date of the participant’s retirement, could
constitute a “qualified domestic relations order” (QDRO) within the
meaning of section 206 (d)(3) of ERISA.
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You represent the applicable facts to be as follows.
The plan participant was married when he retired from employment. In
connection with his retirement, the participant and his then-wife(1)
executed the necessary forms to entitle him to begin to receive his
retirement benefits under the employer’s defined benefit pension plan
(the Plan).(2) You further state
that the participant elected, with his wife’s consent, to decline to
receive his benefits under the Plan in the form of a qualified joint and
survivor annuity (QJSA) and elected instead to receive a single life
annuity. The consent form executed by the participant’s wife stated:
I, [the participant’s spouse], hereby acknowledge
that I have read the notification on the reverse side regarding
post-retirement survivor benefits under the [Plan] and consent to waive
my right to receive such benefits as the participant’s spouse under
the Retirement Equity Act. I also understand that my spouse has
authority to specify a beneficiary without my knowledge or consent and
that I will not receive any benefit under the Plan unless specified as a
beneficiary by my spouse.
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You represent that, in addition to providing the QJSA form of benefit, the
Plan provides a company-paid survivor benefit (described below), to which
the participant had earned a vested right. This company-paid survivor
benefit provides monthly payments to “the surviving spouse of an active
employee, the spouse at retirement of a former employee, or a survivor or
survivors specified by [the participant] in such a manner as the Board of
Benefits and Pensions may prescribe.” Plan, Section VI.A (1). You state
that the Plan generally limits the categories of survivors whom the
participant may designate to receive the company-paid survivor benefit to
the following: (1) the employee’s spouse (with payments to minor children
following the spouse’s death); (2) the employee’s minor children; or (3)
a parent or stepparent of the employee.
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In connection with his retirement, the participant designated his wife,
together with their then-minor child, as the beneficiaries for the
company-paid survivor benefit. That designation has remained in effect
unchanged since it was executed. The participant began receiving monthly
annuity benefits under the Plan at his retirement and has continued
receiving such benefits since that time.
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A state court some time later issued a divorce decree dissolving the
marriage of the participant and his wife. Thereafter, a Nunc Pro Tunc
Supplemental Divorce Decree, (the domestic relations order),(3)
described a division of the participant’s benefits under the Plan. The
domestic relations order assigned to the former wife, as alternate payee, a
certain portion of the participant’s life annuity payments. The domestic
relations order further provided that the former wife “shall be treated as
a surviving spouse, as she was the Participant’s spouse at his retirement,
and that [she] shall receive the employer paid survivor benefits as stated
under [the plan].”
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After the domestic relations order was submitted to the
Plan, the Plan Administrator rejected the domestic relations order as not
qualified with respect to the provision of survivor benefits, stating:
The order attempts to force the Plan to provide a
type or form of benefit not otherwise available under the Plan. As
explained in previous determination reports, there are no survivor
benefits available for any alternate payee. There are no survivor
benefits available for [the participant’s ex-wife]. The court cannot
award the Company-paid survivor benefit to [the participant’s ex-wife]
because she is not a Plan-qualified beneficiary. The court cannot award
a non-existent benefit to an alternate payee.
* * * * *
At his retirement, [the participant] designated his
spouse, [the participant’s former wife], as the beneficiary for the
Company-paid survivor benefit. Pursuant to the terms of the Plan, the
Company-paid survivor benefit can be paid only to a Plan- qualified
beneficiary — spouse, minor children, parent, or stepparent, not a
former spouse. At the time of his retirement, [the participant]
designated his spouse and a minor child to receive the Company-paid
survivor benefit. During the remaining 10+ years that the parties
remained married, [the participant] controlled the beneficiary
designation for the Company-paid survivor benefit. At any time during
the remainder of the marriage, [the participant] could change the
beneficiary to any other Plan-qualified beneficiary or to no one without
[the participant’s former wife’s] consent.
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(Emphasis original).
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You ask whether the Plan is correct in concluding that, in ordering the
company-paid survivor benefit to be paid to the participant’s former wife,
the domestic relations order would require the Plan to provide a “type or
form of benefit, or [an] option not otherwise provided” under the Plan,
which is not permitted under section 206(d)(3)(D)(i) of ERISA. As explained
below, it is the view of the Department that the Plan erred in reaching this
conclusion.
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Section 206(d)(1) of ERISA generally requires pension plans covered by Title
I of ERISA to provide that plan benefits may not be assigned or alienated.
Section 206(d)(3)(A) of ERISA states that section 206(d)(1) applies to an
assignment or alienation of benefits pursuant to a “domestic relations
order,” unless the order is determined to be a “qualified domestic
relations order.” Section 206(d)(3)(A) further provides that pension plans
must provide for payment of benefits in accordance with the applicable
requirements of any QDRO.
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Section 206(d)(3)(B) of ERISA defines the terms
“qualified domestic relations order” and “domestic relations
order” for purposes of section 206(d)(3) as follows:
(B) For purposes of [section 206(d)(3)] —
(i) the term “qualified domestic relations order”
means a domestic relations order —
(I) which creates or recognizes the existence of
an alternate payee’s right to, or assigns to an alternate payee
the right to, receive all or a portion of the benefits payable with
respect to a participant under a plan, and
(II) with respect to which the requirements of
subparagraphs (C) and (D) are met, and
(ii) the term “domestic relations order” means
any judgment, decree, or order (including approval of a property
settlement agreement) which —
(I) relates to the provision of child support,
alimony payments, or marital property rights to a spouse, former
spouse, child, or other dependent of a participant, and
(II) is made pursuant to a State domestic
relations law (including a community property law).
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Section 206(d)(3)(D) specifies that a domestic relations order is qualified
only if such order does not require (i) the plan to provide any type of
benefit, or any option, not otherwise provided by the plan; (ii) the plan to
provide increased benefits (determined on the basis of actuarial value); and
(iii) the payment of benefits to an alternate payee which are required to be
paid to another alternate payee under another order previously determined to
be a qualified domestic relations order.
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Section 206(d)(3)(F) of ERISA provides, with respect to
the joint and survivor and pre- retirement annuity provisions in ERISA,
that, “[t]o the extent provided in any qualified domestic relations
order”:
(i) the former spouse of a participant shall be
treated as a surviving spouse of such participant for purposes of
section 205 (and any spouse of the participant shall not be treated as a
spouse of the participant for such purposes), and
(ii) if married for at least 1 year, the surviving
spouse shall be treated as meeting the requirements of section 205(f).
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It is our view that section 206(d)(3)(F) does not, in itself, limit the
scope of the survivor benefits that may be assigned to an alternate payee
pursuant to section 206(d)(3)(B). Rather, the general scope of permissible
assignment is defined by section 206(d)(3)(B) itself, as limited by sections
206(d)(3)(C) and 206(d)(3)(D).(4)
Section 206 (d)(3)(B) provides broadly for the possibility of assigning not
merely “benefits payable to a participant,” but “all or a portion of
the benefits payable with respect to a participant under a plan.” In using
this particular language, Congress made clear that the QDRO provisions are
intended to enable State courts or agencies to assign any and all benefits
payable under a plan that a participant had earned through employment.
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Further, any assignment effected by a QDRO necessarily has the effect of
requiring the substitution of an alternate payee for the individual
(participant or beneficiary) who would otherwise be entitled to receive the
benefit under the terms of the plan in question. The Plan’s conclusion
that such a substitution would require the Plan to provide a “type or form
of benefit, or any option, not otherwise provided” under the Plan, in
violation of section 206(d)(3)(D), thus, proves too much. Such an argument
would invalidate any assignment of benefits pursuant to a domestic relations
order.
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In this case, the alternate payee was the individual
actually designated by the participant as his beneficiary to receive the
company-paid survivor benefit. At his retirement, and until their
subsequent divorce, the alternate payee was also within the class of
individuals expressly entitled under the terms of the Plan to be named as
beneficiary. The order did no more than preserve the alternate payee’s
status as a spouse with respect to the company-paid survivor benefit when
the divorce would otherwise have altered that status. The assignment
effected by the order, thus, would not require the Plan to provide a type
or form of benefit, or an option not otherwise provided under the Plan. It
is the view of the Department that, under the circumstances of this case
as you have described them, the plan administrator erred in concluding
that an order that named a participant’s former spouse as beneficiary
for the company-paid survivor benefit would violate the limitations
imposed by section 206(d)(3)(D) and therefore could not constitute a QDRO.(5)
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This letter constitutes an advisory opinion under ERISA
Procedure 76-1, 41 Fed. Reg. 36281 (1976). Accordingly, this letter is
issued subject to the provisions of that procedure, including section 10
thereof, relating to the effect of advisory opinions.
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Sincerely,
Louis Campagna
Chief, Division of Fiduciary Interpretations
Office of Regulations and Interpretations
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Although the participant and his
wife were married at the time he retired, they subsequently divorced.
For the sake of clarity, and because the change in status is relevant
to the analysis, this opinion refers to the participant’s former
spouse variously (depending on the relevant time period) as either the
participant’s wife or the participant’s former wife.
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The Department does not interpret
the terms of individual pension plans and has relied, in reaching the
conclusions expressed herein, on your representations as to the terms
of the Plan and the manner in which those terms are interpreted by the
Plan administrator. The Department takes no position regarding the
correctness of the representations.
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An earlier order that had purported
to assign the right of a surviving spouse to receive survivor benefits
in the form of the qualified joint and survivor annuity (QJSA) under
section 205 of ERISA (section 401(a)(11) of the Internal Revenue Code)
to the participant’s former wife was rejected by the Plan as not
qualified because the former wife had validly consented to the waiver
of those rights. You represent that the former wife does not dispute
that she properly waived her right under federal law to receive
survivor benefits in the form of a QJSA.
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Section 206(d)(3)(F) provides an
additional right that may be assigned to an alternate payee: the right
to be treated as if the divorce had not occurred with respect to the
survivor rights created by section 205 of ERISA. The section 205
rights include, but extend beyond, the right to receive the survivor
portion of the joint and survivor annuity form of benefit payment that
must be provided as the normal form of payment under a plan subject to
section 205. Section 206(d)(3)(E) further permits alternate payees to
be afforded the right to receive benefit payments as of a
participant’s “earliest retirement age,” rather than when the
participant is entitled to receive benefit payments.
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A domestic relations order,
nonetheless, could not be deemed to be qualified if it assigned
benefits that have already been paid or have been validly waived under
a plan. For example, if an alternate payee has validly waived QJSA
rights, as the participant’s former wife apparently did when the
participant retired, a subsequently issued domestic relations order
could not require a plan to provide QJSA rights to the alternate
payee.
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