Most of the family lawyers I know do not draft a Qualified Domestic Relations Order (QDRO) for their clients. QDROs are pretty technical beasts, and there are many fine Michigan firms that specialize in drafting them. An opinion released by the Michigan Court of Appeals last week serves as a good example of why drafting of QDROs should be left to an expert. The questions raised in this case were complicated and were addressed in the trial court four times before the issue finally got to the COA.
In Williams v Estate of Williams, Docket No. 307607 (March 28, 2013, unpublished), the COA reversed the trial court's order amending a QDRO 13 years after it initially was entered, vacated the amended QDRO, and reinstated the original QDRO.The net result was this: The former spouse, named as the "surviving spouse" in the QDRO, received 100% of the Plan benefits after death of the Participant. This included the Participant's pre-marital portion, the marital portion, and everything that accrued afterwards during the Participant's 39-year career at Ford.
The Alternate Payee shall be treated as a surviving spouse under the Plan and, accordingly, in the event of death of the Participant either before or after commencement of retirement benefits, payment shall be made to the Alternate Payee as provided in the Plan for a surviving spouse. [NOTE: See the opinion of the COA to read the precise language used in the judgment of divorce and in the QDRO subsequently approved by Ford.] Download Williams v Williams
Shortly after entry of the QDRO, Ford sent a letter dated October 30, 1996, to both plaintiff and Husie stating that "[t]he alternate payee is to be treated as a surviving spouse under the Plan. Survivor benefits to a subsequent spouse will not be permitted unless a modified order is received which designates a specific portion of the survivor benefit to be paid to the alternate payee as a survivor spouse." Husie did not take any action to correct what Ford was pointing to as an error after receiving this letter.
Fast forward three years. Husie married Lawana Williams in April 30, 1999. On July 1, 2006, after over 39 years of employment with Ford, Husie retired. Once Husie retired, plaintiff started receiving $374.21 per month as disbursements from the Ford-UAW retirement plan. Husie died in December 2008, and then Plaintiff began to receive surviving spouse disbursements in the amount of $1,219.97 per month. In other words, she received not only Husie’s marital portion from the 18-year marriage, but also benefits that accrued during the time before Plaintiff had married Husie and also those that had accrued during his marriage to Lawana Williams. [47.03% of the pension accrued during Husie’s marriage to plaintiff, 18.63% accrued during Husie’s marriage to Lawana, and approximately 34% accrued while Husie was married to no one].
The personal representative of Husie’s estate subsequently filed a motion to amend the QDRO, arguing that to give Plaintiff all of the survivorship benefits under the 1996 QDRO was inconsistent with the judgment of divorce. This motion was denied by the trial court. The judge stated its view that the judgment of divorce did not clearly award plaintiff a mere portion of the surviving spouse benefit and also that the suit was time-barred.
On motion for re-hearing, the estate again attempted to modify the QDRO showing that another Wayne County judge had ruled completely differently on virtually identical facts. The Court appointed its own expert to review the JOD and QDRO and to testify as to the legal effect of those documents.
In a later hearing, the court's expert testified that according to the terms of the QDRO, plaintiff was to receive 100% of the surviving spouse benefit, and indicated that this is a problem because “the case law clearly . . . indicates that the Judgment should control, not the QDRO.”
The judge took the matter under advisement and during this time, the estate submitted additional (unpublished) authorities, asserting the position that the terms of the JOD control and that if the QDRO is inconsistent with the JOD, the QDRO is invalid and must be amended. According to the estate’s position, if the QDRO were properly drafted, then plaintiff would receive the same amount after Husie’s death that she was receiving before his death.
The trial court held that MCR 2.612 didn’t apply to this case and that the QDRO should be redrafted to conform to the estate’s argument. Under this decision, Plaintiff would only receive the amount she normally received before Husie’s death (i.e., $374).
Did this decision resolve the issue? No. Several more hearings were held, and ultimately, the trial court entered a QDRO that divided the survivorship benefits 50/50 between plaintiff and the estate, entering the amended QDRO nunc pro tunc, as though entered on the date of divorce, October 15, 1996. The salient portion of the amended QDRO provided that
"[t]he Alternate Payee shall be designated as a surviving spouse of the Participant for purposes of Fifty Percent (50%) of the monthly postretirement survivor annuity * * * In addition, the spouse to whom the Participant was married at the time of his death, shall receive the portion of the monthly postretirement survivor annuity not assigned to the Alternate Payee under this Order."
The Court of Appeals Ruling:
The COA reversed the trial court, vacated the amended QDRO, and reinstated the original QDRO. The rationale for its decision was this:
When a QDRO is executed contemporaneously with a divorce judgment and required by the terms of the judgment, both the judgment and the QDRO are considered part of the property settlement. Thornton v Thornton, 277 Mich App 453, 457-458; 746 NW2d 627 (2007). Here, not only was the initial QDRO contemporaneously entered along with the divorce judgment, the judgment explicitly incorporated the terms of the QDRO, where the judgment provided that plaintiff was to receive benefits “in accordance with the terms of the Qualified Domestic Relations Order which shall be a separate Order and attached hereto.”
The COA stated the trial court could interpret and clarify the parties’ agreement without considering MCR 2.612, but only “provided it[‘s action] does not change the parties’ substantive rights as reflected in the parties’ agreement.” Id. at 469 [Emphasis in the original].
Accordingly, the COA’s decision was that the original QDRO unequivocally gave Plaintiff sole survivorship benefits as to the Ford-UAW pension and the trial court’s amended QDRO only gave Plaintiff 50% of the survivorship benefits. A “mistake” occurred in the drafting of the original QDRO. Mistakes fall under the ground provided under MCR 2.612(C)(1)(a) and under MCR 2.612(C), the QDRO could only be amended if a party sought amendment within one year of entry of the QDRO.
As a result, the COA reversed the trial court’s decision granting the estate’s motion to amend the QDRO, vacated the trial court’s amended QDRO, and reinstated the original 1996 QDRO.
Hire an expert to draft QDROs.
Make sure that the language of the QDRO is consistent with the language and intent of the judgment of divorce.
Always provide specifically for distribution of pre-marital accurals and post-marital accruals in a QDRO.
Never ignore a letter from the Plan Administrator telling you that "[s]urvivor benefits to a subsequent spouse will not be permitted unless a modified order is received which designates a specific portion of the survivor benefit to be paid to the alternate payee as a survivor spouse."
Robert Treat, a well-qualified drafter of QDROs commented as follows after this post was uploaded:
"I was the expert brought in to try to fix the original QDRO, despite the incorporation language. The problem was Ford’s interpretation of the survivorship language, and we attempted to fulfill the intent of the parties, which was different from such interpretation. Ford said “a surviving spouse” means the surviving spouse, but the parties meant that “a surviving spouse” should mean one of the surviving spouses. Ford wouldn’t budge because “a surviving spouse under the Plan” means the surviving spouse, not in contemplation of a QDRO, as the Plan document doesn’t address QDRO procedure in that regard.
"Ford’s QDRO materials at the time provided only one choice for language for survivorship rights, and that is the language the drafter of the original QDRO used.
"Note to all – there are more of these old Ford QDROs with Ford’s “model” language out there, that have been approved by Ford and are in force.
"In this case the COA held that procedurally the original QDRO must stand, but in other cases it has been possible to amend the QDRO.
"Friendly advice – (1) if you have a Ford QDRO from the 1990s, check it. (2) Don’t use Plans’ “model” QDROs without critical analysis. You will almost always have to revise it. (3) Of course, don’t dabble.
"Generally, the alternate payee should get the portion of the preretirement survivor annuity attributable to the period of the marriage. Also, the alternate payee should get the portion of the postretirement survivor annuity attributable to the period of the marriage, unless the alternate payee’s share of the accrued benefit is based on the alternate payee’s own lifetime."
Another take-away was pointed out by Mark Cherniak after this post was uploaded. Mark said:
"Another "take away" from the case is to be leery of using QDRO or other DRO language that the Order is "incorporated" in the parties' JOD. This appeared to be the basis of the COA reinstating the original, although apparently incorrect QDRO. Because the QDRO stated it was incorporated in the JOD, the unintended QDRO language assigning the former spouse the full survivor benefit (who was married to the employee about half the time of his service in the pension), became part of the JOD. A such, the employee's estate was seeking modification of the JOD and the QDRO many years after the JOD was entered, and was thwarted by the one year rule.
"Many QDRO samples provide the "incorporated" in the JOD language, e.g., the State pension samples, and local government. Consider modifying that to, for example, this QDRO/EDRO is entered pursuant to the applicable terms of the parties' JOD dated ____." [My emphasis] Good point, Mark!
Some Michigan firms that draft QDROs are the following:
Robert Treat/QDRO Express;
David and Jackie Roessler/Divorce Solutions