When Does a Domestic Relations Order Determine the Disposition of ERISA Plan Benefits?

Abstract

This Article argues that if the plan criteria for benefit designations and revocations for an ERISA plan do not provide for compliance with a domestic relations order, such an order may not determine the disposition of ERISA plan benefits. ERISA thus voids any benefit claim based on a domestic relations order that does not satisfy the plan criteria, whether the claim is made against the plan or the participant's designee under the plan's criteria.

ERISA gives pension plans subject to the ERISA anti-alienation rules no discretion. Such plans' criteria for benefit designations and revocations must require compliance with domestic relations orders that are qualified domestic relations orders (QDROs) and must prohibit compliance with domestic relations orders that are not QDROs. A waiver in a domestic relations order by a former spouse of an interest the participant's benefits in such a plan thus may not be enforced against the plan or against the former spouse. The Supreme Court will decide this term whether it accepts this conclusion. An agreement by a participant in a domestic relations order to make or retain a beneficiary designation in such a plan (such agreements are not QDROs, because QDROs are orders directed at ERISA plans not at participants) thus may not be enforced against either (1) the participant's designee under the plan's criteria; or (2) the plan.

ERISA gives life insurance plans and pension plans not subject to the ERISA anti-alienation rules, such as top-hat plans, discretion. Such plans' criteria for benefit designations and revocations may but need not require compliance with some or all domestic relations orders. Provisions requiring such compliance are rare, but when present they most often provide that a participant's former spouse will not be treated as a designee following the participant's divorce unless the participant redesignates the former spouse after the divorce. If such a plan's criteria for benefit designations and revocations do not require compliance with a domestic relations order, whether by reason of an explicit exclusion or absence of a provision for such compliance, such orders may not determine the disposition of the plan's benefits. Thus, benefit claims based on such orders may not be enforced against (1) the participant's designee under the plan's criteria; or (2) the plan.

Keywords: ERISA, Pension, Retirement, Life Insurance, Top-Hat Plans, Divorce, Domestic Relations,Benefits, Beneficiaries

JEL Classification: J32, K31, K32, M52