Opinion ID: 2807039
Heading Depth: 3
Heading Rank: 1

Heading: June QDRO

Text: As the basis for her appeal, Mrs. Jones asserts that the trial court erred in its respective determinations that each of the QDROs she submitted to the Board were invalid. We separately examine the QDROs in question. In rejecting the June QDRO, the Board articulated several reasons for its refusal to qualify the document. The first issue identified was the conflicting instructions regarding Mr. Akers’ election of retirement benefits. The June QDRO provides in one section of the document that, as required by West Virginia Code § 5-10-22 (2013),19 Mr. Akers will have the right to select from the available types of annuities set forth in West Virginia Code § 5-10-24. At the same time, however, Mrs. Jones inserted language in paragraph 7(f) that required Mr. Akers to designate her “as the surviving spouse or survivor beneficiary of his retirement benefits” and to “elect a joint survivor annuity” with Mrs. Jones named as the beneficiary. The Board asserts that the quoted language conflicts with the standardized language in paragraph 7(d), which requires that “the form of benefit at time of payment shall be elected by the Participant.”20 The 19 “[U]pon his or her retirement he or she has the right to elect an option provided in section twenty-four [§ 5-10-24] of this article.” W.Va. Code § 5-10-22(a). 20 A retiring PERS member may select from three different types of annuities: (1) a lifetime annuity, payable during the member’s life with no survivor benefits; (2) Option A–Joint and survivor annuity, a reduced annuity payable to the member that, upon the member’s death, continues to be paid during the lifetime of the designated beneficiary; and (3) Option B–Modified joint and survivor annuity, one-half of a reduced annuity payable to the member during his or her lifetime with the remaining one-half awarded to a designated (continued...) 13 second basis for the Board’s rejection of the June QDRO was the naming of Mrs. Jones as the alternate payee for purposes of calculating survivor benefits.21 Refusing to acknowledge the inherent inconsistency of these directives, Mrs. Jones asserts that the June QDRO was fully enforceable. Looking entirely beyond state public retirement systems, Mrs. Jones focuses on the options that are available under either private plans or plans subject to the Employee Retirement Income Security Act of 1974 (“ERISA”). See 29 U.S.C. §§ 1001 to -1461 (2012). Essentially positing that the purpose of a QDRO is to fully effectuate the terms of a final order of divorce, Mrs. Jones maintains that the necessary statutory authority and case law permit what she sought to accomplish. Upon distillation of these arguments, we find that Mrs. Jones is describing the law as she wishes it to be, rather than as it currently exists. Mrs. Jones admits that the June QDRO “deviates” from the Board’s model QDRO, but nonetheless insists that the subject variances do not prevent its enforcement. The two acknowledged variances include the provisions in paragraph 7(f), which required Mr. Akers to elect the joint and survivor annuity with Mrs. Jones being named as the 20 (...continued) beneficiary upon the member’s death. See W.Va. Code § 5-10-24, 21 The model QDRO, prepared and distributed by the Board, expressly provides that the alternate payee is not to be identified as the alternate payee for these purposes. 14 beneficiary, and the provision in paragraph 7(b) that required Mrs. Jones to be named as the surviving spouse for purposes of calculating benefits allocated in the QDRO. Characterizing the first variance as an issue of timing, Mrs. Jones argues that the QDRO merely seeks to enforce the advance election of retirement benefits that Mr. Akers made as part of the divorce agreement. Addressing the second variance–the naming of an ex-spouse as a surviving spouse within the terms of a QDRO– Mrs. Jones suggests that the Legislature has implicitly authorized the use of a QDRO for this purpose. Each of these arguments fails upon analysis. After citing federal case law interpreting ERISA for the proposition that literal compliance is not required for enforcement of a QDRO,22 Mrs. Jones maintains that the language in paragraph 7(f) that required Mr. Akers to select a joint and survivor annuity with Mrs. Jones named as his sole surviving beneficiary did not render the June QDRO unenforceable. Not only is the federal law relied upon by Mrs. Jones inapplicable, but her 22 The cases Mrs. Jones relies upon for this proposition are wholly distinguishable from the issues in this case. See, e.g., Metropolitan Life Ins. Co. v. Bigelow, 283 F.3d 436, 443-44 (2nd Cir. 2002) (finding omission of decedent’s and daughters’ addresses non-fatal as plan administrator knew both decedent’s address and address of daughters’ counsel); Trustees of Directors Guild of America v. Tise, 234 F.3d 415, 426 (9th Cir. 2000) (ruling omission of ex-wife’s current mailing address non-fatal to enforcement of QDRO given inclusion of counsel’s mailing address). Rather than an inadvertent address omission or the typographical insertion of a name readily acknowledged not to be a dependent of the parties, the compliance-related issues in this case are substantive in nature and not, as in the cited cases, technical matters of form completion. 15 insistence that the Board may use the divorce decree to correct the non-conforming aspects of the June QDRO indicates a grave misunderstanding of the laws which govern access to public retirement funds. By design, state retirement systems are exempt from the provisions of ERISA. See Erb v. Erb, 661 N.E.2d 175, 178 (Ohio 1996) (recognizing that Congress expressly exempted government retirement systems from ERISA); 29 U.S.C. § 1003(b)(1) (providing that ERISA does not apply to employee benefit plan defined as “governmental plan”).23 While operating outside the statutory provisions that govern ERISA, PERS is subject to applicable IRS provisions. See W.Va. Code § 5-10-3a(c) (2013) (pronouncing that PERS “is intended to meet the federal qualification requirements of Section 401(a) [26 U.S.C. § 401(a)] and related sections of the Internal Revenue Code as applicable to governmental plans”). For PERS to maintain its status as a public retirement fund, which in turn allows its members to make tax-deferred contributions, adherence to federal tax laws is required. The controlling IRS provisions generally define a QDRO and establish the parameters necessary for the use of such orders. See 26 U.S.C. § 414(p) (2012). 23 See 29 U.S.C. § 1002(32) (defining “governmental plan”). 16 To assure compliance with federal tax laws,24 the Board promulgated rules that address the requisites of domestic relations orders entered by this state’s courts. To be enforceable in this state, a QDRO must provide the name and last known address of the participant and his or her spouse and designate the ex-spouse as the “alternate payee.” 162 C.S.R. § 1-6.2.5.1; 26 U.S.C. § 414(p). Inclusion of the “percentage of the marital property portion of the member’s or retirant’s Vested Accrued Retirement Benefit which is to be paid to the alternate payee” is another critical component of the QDRO. 162 C.S.R. § 1-6.2.5.3. Consonant with federal tax laws, a QDRO “may not require the member’s retirement plan to provide the alternate payee with any type or form of benefit, or any option, not otherwise provided under the plan . . . .” Id. at § 1-6.2.6. Of particular import to the issue at hand is the rule which requires that an ex-spouse receives his or her proportionate share of the retirement award “at the same time and in the same form as the benefit elected by and paid to the member once he or she enters pay status.” Id. at § 1-6.2.3 (emphasis supplied). The statutory right to decide at the point of retirement between the three annuity options is a pivotal construct of PERS. Pursuant to West Virginia Code § 5-10-24, a retiring PERS member has a choice of three different types of annuities.25 This right of election is reserved both by statute and by rule to the PERS member. See id., 162 C.S.R. § 24 See W.Va. Code § 5-10-3a(c). 25 See supra note 20 (describing annuity options provided by W.Va. Code § 5-10-24). 17 1-6.2.3. The election of benefits cannot be made by the former spouse as the alternate payee. See King v. King, No. 35696, 2011 LEXIS 242 (W.Va. May 16, 2011) (memorandum dec’n) (recognizing that QDRO does not permit ex-wife to dictate type of retirement benefits exhusband elects); Beddell v. Beddell, 2009 WL 4263631, (Ohio App. 2009) (finding both that alternate payee ex-wife had no authority to decide type of benefit PERS member elects and that trial court could not direct ex-husband’s choice of benefits). Once the election has been made by the PERS member, the specified percentage of the retirement benefits is payable to the alternate payee pursuant to the terms of a QDRO. But the QDRO cannot control the election itself as that matter is expressly reserved to the PERS member. As a creature of statute, PERS has only those rights granted to it by the Legislature. See Hansford v. PERS, 868 N.E.2d 708, 711 (Ohio App. 2007) (recognizing that state retirement systems, as statutorily-created entities, are expressly limited to grants of legislative power). By law, PERS benefits are not subject to execution, attachment, garnishment, bankruptcy or insolvency laws, or assignment. See W.Va. Code § 5-10-46 (2013). This protection against alienation of benefits reflects a policy decision laudably aimed at preserving the retirement assets of public employees. See State ex rel. DHHR v. PERS, 183 W.Va. 39, 42, 393 S.E.2d 677, 680 (1990) (observing that W.Va. Code § 5-10­ 46 is the result of public policy that “is especially wary of allowing garnishment of pension income” and recognizing that garnishment is permitted only upon statutory authorization). 18 With an amendment to the statute in 2000, PERS benefits were made subject to QDROs. See 2000 W.Va. Acts, ch. 204, p.1703 (amending W.Va.§ 5-10-46 to allow QDROs to affect distribution of PERS benefits). However, the Board can only release funds from PERS pursuant to a QDRO that complies with state retirement laws. See 162 C.S.R. § 1-6.2. Thus, even if a PERS member agrees to make a particular election of benefits as part of his or her divorce agreement, that agreement by itself cannot effect the removal of a retirant’s funds from PERS. See Ohio PERS v. Coursen, 806 N.E.2d 197, 201 (Ohio App. 2004) (ruling that former wife was not entitled to survivor benefits despite ex-husband’s agreement to designate her as “irrevocable beneficiary” based on ex-husband’s failure to complete “member beneficiary designation” form); Hansford, 868 N.E.2d at 712 (holding that PERS was prevented from issuing statutory survivor benefits to ex-wife notwithstanding provision of settlement agreement allowing such benefit because of ex-husband’s failure to authorize Board to act by designating ex-wife as beneficiary). Critically, the distribution of retirement benefits from PERS to a former spouse is accomplished through a QDRO and not through the terms of the final order of divorce. See King, 2011 LEXIS 242. At issue in King was the family court’s attempt to circumvent the provisions of the QDRO to increase the amount of retirement benefits that the ex-wife was receiving. As we recognized in King, the terms of the QDRO were controlling in regards to how the PERS benefits were to be paid. Not only did the family court in King 19 have no authority to compel an election expressly reserved in the QDRO to the PERS member, but it could not construe the QDRO in a manner inconsistent with the retirement statutes. See id; see also Bd. of Trustees of Indiana Pub. Employees’ Ret. Fund v. Grannan, 578 N.E.2d 371, 376 (Ind. App. 1991) (recognizing that PERF was not obligated to comply with trial court’s rulings in conflict with statutes and invalidating provisions of QDRO that required early retirement by husband or preretirement payments by PERF to wife). Seemingly overlooked by Mrs. Jones is the fact that the Board’s initial examination of a QDRO and its subsequent application of an approved QDRO is performed without reference to a final order of divorce. When the Board reviews a submitted QDRO for purposes of determining whether that order complies with statutory and regulatory law, it does not have a copy of the final order of divorce before it. Its only task is to determine whether the QDRO is enforceable in terms of whether the required information is set forth and whether the proposed order exceeds the permissible directives applicable to the PERS member or the Board. The limited role of a retirement board in its review of a QDRO was explained in McPhee v. Maine State Retirement System, 980 A.2d 1257 (Maine 2009): Once a proposed QDRO is received, the statute does not charge the executive director with determining whether it squares with the intent of the parties or the divorce court as expressed in a separate settlement agreement or divorce judgment, and explicitly prohibits the MSRS from being made a party to the divorce action. Rather, the executive director’s duty is a narrow one: to determine whether the QDRO meets specific statutory criteria . . . . These criteria include the 20 requirements that the QDRO be sufficiently specific concerning the exact division of benefits, and that the QDRO “not require the retirement system to provide a type or form of benefit or an option not otherwise provided by the retirement system.” The statute makes no provision, however, for the MSRS to assess a proposed QDRO in relation to the related settlement agreement, divorce judgment, or other documents. Id. at 1264 (internal citations omitted). The Board’s determination that the June QDRO was unenforceable due to the inclusion of language in paragraph 7(f) that required Mr. Akers to make a particular election of benefits was required by law. See W.Va. Code § 5-10-24, 162 C.S.R. § 1-6.2.3. In unmistakably clear terms, the QDRO states: “[N]othing in this Order shall be construed as granting the Alternate Payee any election rights with respect to the form of benefit; rather, the form of benefit at time of payment shall be elected by the Participant.” In forcing Mr. Akers to choose a specific type of annuity benefit, the June QDRO exceeded the scope of permissible actions contemplated and authorized by legislative rule. See id. By law, the Board was mandated to “not honor any Qualified Domestic Relations Order seeking to divide a members [sic] pension benefit which does not meet the requirements of this rule.”26 162 C.S.R. § 1-6.2. 26 Given the clear violation of the election of benefits reserved to a PERS member, we find it unnecessary to address the Board’s additional bases for its disallowance of the June QDRO. 21 In her attempt to cast the benefits issue as one of timing only, Mrs. Jones fails to appreciate the constraints imposed on the Board’s actions and the permissible use of a QDRO within the public retirement system.27 Through her argument that Mr. Akers was simply being required to act consistent with the advance election he made as part of the divorce agreement, Mrs. Jones ignores the statutory design of PERS. The Board has no authority “to look beyond the four corners of a QDRO to determine the underlying intent of the parties.” McPhee, 980 A.2d at 1268. And, as discussed above, the election of benefits is expressly reserved to the PERS member and is required to be made at the time the member is preparing to retire. The Board has no obligation to try to enforce any preexisting agreement made by a PERS member in relation to those benefits.28 Only upon the completion of the paperwork provided by PERS is an election of benefits accomplished. And that election, barring three statutory events, is irrevocable. See W.Va. Code § 5-10-24. Despite its limited ability to enforce the provisions of a divorce agreement, the Board correctly observes that the right of a party to compel performance of those agreements 27 The fact that QDROs can be used under ERISA to name a former spouse as a sole surviving beneficiary to the exclusion of a subsequent spouse has no bearing as ERISA provisions are inapplicable. See Keith S. Bozarth, QDROs and Public Pensions in Missouri, 51 J. Mo. B. 149 (1995) (observing that “the full range of standards normally applicable to QDROs does not apply” due to exemptions from ERISA for governmental plans). 28 See Tise, 234 F.3d at 424 (recognizing that “a QDRO creates obligations for the pension plan, not for any individual participant or beneficiary.”). 22 remains.29 Critically, however, the Board can only act consistent with its statutory authority. Pursuant to this authority, an ex-spouse may receive up to 100 percent of the marital property portion of the retirement benefits through a QDRO. In this case, because Mrs. Jones was only married to Mr. Akers during twenty-six of the thirty-years he was a PERS member, the Board could allow Mrs. Jones to have the proportional amount agreed upon by the parties– fifty percent–of the retirement benefits earned during the course of the marriage. The Board submits that any amount above this would be in excess of its statutory authority. See McPhee, 980 A.2d at 1267 (observing that “even if John and Sharon had specifically stated in their QDRO that they wished to transfer the ‘surviving spouse’ service retirement benefit to Sharon, there would have been no statutory authority for doing so and the order would not have been qualified”). Seeking to create law through sophistry, Mrs. Jones posits that the Legislature has implicitly sanctioned what she sought to accomplish here–the naming of herself as sole surviving spouse through the QDRO. Her argument springs from the right of a retired PERS member who experiences divorce or spousal death to change his or her annuity selection.30 See W.Va. Code § 5-10-24. Because the Board’s approval of the new annuity 29 As the Board noted, there are alternate means of seeking to enforce those rights. 30 A retired PERS member may revoke a joint and survivor annuity option and replace it prospectively with a straight life annuity if the spouse dies or the member becomes divorced. Similarly, a retired PERS member who subsequently remarries is permitted to (continued...) 23 selection is subject to whether the election would conflict with the terms of a preexisting QDRO, Mrs. Jones theorizes that the Board has anticipated and authorized PERS members to make their ex-spouses the sole surviving beneficiary of their retirement benefits through a QDRO. We do not reach the same conclusion. Instead, we find the statutory language that references a preexisting QDRO to reflect the legislative objective of enforcing established benefit rights. Consequently, the retired PERS member cannot seek, upon the instance of divorce or spousal death, to cancel the existing rights of an ex-spouse to his or her proportionate share of marital property through an existing QDRO.31 West Virginia Code § 5-10-24 does not evince a legislative decision to prevent a PERS member from making any changes that may involve a new spouse when a QDRO is in place; instead, it merely protects the established rights of a former spouse from extirpation. Based on the foregoing, we affirm the circuit court’s decision that the June QDRO was not enforceable. As the law exists, there is no statutory authority to accomplish through a QDRO directed at PERS benefits what Mrs. Jones bargained for as part of her divorce: survivorship benefits. Addressing the absence of survivorship benefits to former 30 (...continued) prospectively elect a joint survivor annuity option. See W.Va. Code § 5-10-24. 31 While Mrs. Jones asserts that this Court held in King that a party could use a QDRO for the purpose of preventing the other party from naming a subsequent spouse as a beneficiary, that issue was not before the Court and, thus, was never specifically ruled upon. See King, 2011 LEXIS 242. 24 spouses under Ohio law,32 the court commented in Patterson v. Patterson, 784 N.E.2d 1213 (Ohio. App. 2003), that “the issue of whether state retirement plans should have stronger protections for nonmember former spouses is one that must be left for resolution by our General Assembly.” Id. at 1218.