DoL: New Order May Amend QDRO Payout Schedule

>Even though Section 206(d)(3)(D)(iii) of ERISA dictates that a subsequent domestic relations order can not be considered a QDRO if it alters the payment of benefits that have been assigned to another alternate payee, in this case, the rule does not apply because the alternate payee was named in the successive order.   Thus, the subsequent order can be classified as a QDRO, amending any contradictory provisions in the previous order in regards to the pension plan payment schedule, according to an Advisory Opinion issued by the US Department of Labor (DoL).

>The question arose out of a divorce and property settlement involving the participant – now a retired employee of Northwest Airlines, Inc. – and the alternate payee – the participant’s former spouse after the participant had become vested in the company’s defined benefit pension plan.

>A QDRO was filed originally with the pension plan in 1997, while the participant was still an active employee of Northwest Airlines that assigned to his former spouse a percentage of the participant’s pension benefits.   In 2000, while an active employee, the participant asked the plan’s administrator how to modify the original QDRO to reduce the portion of benefits his former spouse would receive.   At that time, the administrator said it would not entertain notions to modify the spouse’s future payout outlined in the original QDRO.

>Then in 2002, a second domestic relations order was submitted to the plan that said the two parties were “in agreement” that provisions detailed in the original QDRO should be amended and that the originally payout provisions should be “deleted,” to be superceded by the now lower payout arrangements outlined in the second order.

>Despite the second order being filed, the administrator still had doubts about the validity of the amendment and later in the year, before the administrator had issued a determination on the qualified status of the new order, the participant retired.    Northwest began paying benefits to both the participant and the alternate payee under the terms of the 1997 QDRO.   After benefits began to be paid out, the plan’s administrator sent a letter to both parties involved explaining that the subsequent order could not reduce the original QDRO’s payout arrangement.   This decision was based on the administrator’s determination that the amended order was “provisionally” determined not to be a QDRO and thus the original order would continue in “full force and effect.”

The plan’s administrator then requested an advisory opinion from the DoL seeking an official determination of whether an order that “takes away” benefits previously assigned to an alternate payee could be a QDRO.

A copy of the DoL’s Advisory Opinion can be found at     www.dol.gov/ebsa/regs/aos/ao2004-02a.html.