An issue that we have run into numerous times (and continue to run into) is when a plan, or the company the plan has hired to review proposed Qualified Domestic Relations Orders (“QDROs”), looks “beyond the surface” of the proposed QDRO when determining if the order is “qualified” within the meaning of the Employee Retirement Security Act of 1974 (“ERISA”). There have been occasions where the reviewer will look at the underlying divorce decree/separation agreement, or other document, to see if there is a conflict with the proposed QDRO. Federal law on this matter is clear: reviewers are not to perform such extraneous investigation and/or impose their own sense of equity.
To be considered “qualified” under ERISA, a domestic relations order must specify:
(i) the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order,
(ii) the amount or percentage of the participant’s benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined,
(iii) the number of payments or period to which such order applies, and
(iv) each plan to which such order applies.
29 U.S.C. § 1056(d)(3)(C).
In addition, the order can be considered a QDRO only if it:
(i) does not require a plan to provide any type or form of benefit, or any option, not otherwise provided under the plan,
(ii) does not require the plan to provide increased benefits (determined on the basis of actuarial value), and
(iii) does not require 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.
29 U.S.C. § 1056(d)(3)(D).
A plan’s inquiry into whether a Domestic Relations Order (“DRO”) is “qualified” is limited to checking the order for the above criteria. See Kennedy v. Plan Adm’r for DuPont Sav. Inv. Plan, 55 U.S. 285, 129 S.Ct. 865, 876 (2009), (a “QDRO enquiry is relatively discreet, given the specific and objective criteria for a domestic relations order that qualifies as a QDRO.”). As the U.S. Seventh District Court of Appeals stated in Blue v. UAL Corp., 160 F.3d 383, 385 (7th Cir.1998):
ERISA does not require, or even permit, a pension fund to look beneath the surface of the order. Compliance with a QDRO is obligatory. “Each pension plan shall provide for the payment of benefits in accordance with the applicable requirements of any qualified domestic relations order.” 29 U.S.C. § 1056(d)(3)(A). . . . This directive would be empty if pension plans could add to the statutory list of requirements for “qualified” status.
(emphasis added); see also Huntsman v. 3m Co., Civ. No. 19-02 (PAM/DTS) (D.Minn.Aug. 26, 2019); Hawkins v. Comm’r of Internal Revenue, 86 F.3d 982, 989-90 (10th Cir.1996) (“Whether a domestic relations order qualifies as a QDRO depends on the language of the order itself; the subjective intentions of the parties are not controlling.”); Brown v. Continental Airlines, Inc., 647 F.3d 221, 227 (5th Cir.2011) (“[T]he determination of whether a DRO is qualified [is] a straightforward matter that requires the administrator to take DROs at face value and not engage in complex determinations of underlying motives or intent.”).
In Blue, the Seventh Circuit explained why plans are not to look beneath the surface of the proposed QDRO as:
ERISA’s allocation of functions—in which state courts apply state law to the facts, and pension plans determine whether the resulting orders adequately identify the payee and fall within the limits of benefits available under the plan—is eminently sensible. [T]he spectacle of [plan] administrators second-guessing state judges’ decisions under state law would be repellent. Unsuccessful litigants would refile their briefs from the state litigation with pension administrators, in the hope that lightning may strike as laymen review the work of judges. Far better to let the states’ appellate courts take care of legal errors by trial judges. Pension plans are high-volume operations, which rely heavily on forms, such as designations of beneficiaries. . . . Reviewing the substance of these orders would increase the costs of pension administration (costs ultimately passed on to beneficiaries), increase the error rate (to the detriment of participants and their loved ones), and cause delay as plans carried out the additional inquiries (again to the detriment of beneficiaries, who may need the income quickly).
Blue v. UAL, 160 F.3d at 386 (emphasis added); see also Matthews v. E.I. Dupont de Nemours & Co., No. 16-3237, at *8 (3d Cir.Mar. 16, 2017) (Plan administrators questioning a state court’s decision in executing a proposed QDRO “subverts the deference owed to state-court QDROs by ERISA plan administrators.”).
As a practical matter, if you come across a QDRO reviewer who goes beyond his/her authority and looks to extrinsic documents, it may be more economical to just revise the proposed QDRO and/or the underlying divorce decree. However, if you refute the reviewer’s actions, there is quite a body of case law on your side.