There Must Be a QDRO to Divide Retirement
A federal statute called the Employee Retirement Income Security Act (ERISA) governs most retirement plans. To divide a retirement plan upon divorce, a court must sign a domestic relations order. Once the Plan Administrator of the retirement plan approves the domestic relations order, it becomes a Qualified Domestic Relations Order (QDRO). In the absence of a QDRO, a court cannot divide retirement benefits, even if the divorce decree provides otherwise.
Kennedy v. Plan Administrator is a case in point. Mr. Kennedy was a DuPont employee who participated in DuPont's retirement plan. After Mr. Kennedy married, he designated his wife as the beneficiary of his retirement plan in the event that he died before she did. Later, the couple divorced. In the divorce decree, Ms. Kennedy agreed that she would be divested of "all right, title, interest, and claim in and to . . . the proceeds therefrom, and any other rights related to any . . . retirement plan, pension plan, or like benefit program existing by reason of [Mr. Kennedy's] employment." On its face, this language divested Ms. Kennedy of any interest in Mr. Kennedy's DuPont retirement plan.
But no QDRO was signed. Mr. Kennedy retired from DuPont. Later, he died. The retirement plan paid the balance of Mr. Kennedy's retirement - approximately $400,000 - to the former Ms. Kennedy because, it said, the waiver in the divorce decree did not comply with ERISA.
Mr. Kennedy's estate sued Mr. Kennedy's ex-wife to recover this $400,000. The trial court ruled for the estate, but the estate lost on appeal to the United States Court of Appeals for the Fifth Circuit. Quoting a United States Supreme Court case, the court held that Congress had enacted strict and detailed rules governing how beneficiaries of pensions can be changed. Mr. Kennedy had failed to follow those rules, so his ex-wife received his retirement after he died.
