Thursday, March 26, 2009
Court of Appeal Rules:
Order Dividing Pension Benefits Cannot Be Changed Postmortem
By STEVEN M. ELLIS, Staff Writer
The First District Court of Appeal ruled yesterday that a trial court could not retroactively change an order in a 1988 divorce to grant a woman part of the pension plan of her former husband after he died before reaching retirement.
Holding domestic relations orders entered before a plan participant’s death may be qualified postmortem to survive federal anti-alienation provisions if an interest is specifically conveyed, Div. Two ruled an order reserving “jurisdiction” over a plan did not support amendment nunc pro tunc.
Robert Padgett died in 2005, and his former wife, Beverly Padgett, claimed as community property under a 1988 domestic relations order a portion of survivor’s benefits her former husband had accrued from the Automotive Industries Pension Plan while working as a mechanic.
The plan provided for monthly payment of half of what Robert Padgett would have received upon retirement, and was governed by the Employee Retirement Income Security Act of 1974, which preempts state law and restricts alienation of survivor’s benefits
ERISA benefits normally vest in a surviving spouse, and in the 17 years after his first marriage Robert Padgett was remarried to Donna Little, who became personal administrator of his estate.
The act, however, contains an exception for domestic relations orders which state the mailing addresses of participants and payees, the amount or percentage of benefits, and the number of payments and name of the plan impacted, and which create an enforceable interest.
Although Beverly Padgett had taken no steps to notify the plan of her claim or to seek an interest under the court’s reservation of jurisdiction, saying later she did not know she had to do anything until the benefits became payable upon her ex-husband’s death, she sought to amend the 1988 order nunc pro tunc in order to meet ERISA’s specificity requirements.
Marin Superior Court Judge Verna A. Adams granted Padgett’s request, but Presiding Justice J. Anthony Kline wrote on appeal that the trial court exceeded its inherent power to do justice to litigants whose rights are threatened by a delay that is not their fault.
“[W]hile preretirement death ordinarily irrevocably vests the right to survivor benefits in the existing spouse, a [domestic relations order] possessed by a former spouse before the plan participant’s death may be qualified as a [qualified domestic relations order] postmortem where the DRO substantially complies with ERISA’s specificity requirements for a QDRO.”
But Kline said Adams order did “far more than clarify, fix technical defects, or correct the original DRO,” to express the court or parties’ intent in 1988, and more than simply allowing Padgett to perfect a deficient DRO to meet ERISA’s technical requirements.
Instead, the justice wrote, “the nunc pro tunc order created the interest in the Plan by awarding Beverly an interest in the pension plan and qualified such DRO as a QDRO. We are convinced the trial court in this case exceeded its power…where the original DRO evinced no intent to award Beverly an interest in Robert’s pension benefits and, a fortiori, no intent to award her any interest in [qualified preretirement survivor annuity] surviving spouse benefits.”
Justices Paul R. Haerle and James A. Richman joined Kline in his opinion.
The case is In re Padgett, A120644.
Copyright 2009, Metropolitan News Company