Some Quirks About QDROs

Wow, QDROs (otherwise known as qualified domestic relations orders) are all the rage these days, aren’t they? QDROs concern the intersection of divorce/family law and ERISA governed benefit plans, in particular retirement plans. As a general rule, a QDRO is a court order in a state divorce proceeding that, if it meets certain requirements, has the effect of controlling dispersal of the ERISA governed plan benefits, benefits which, in the absence of such an order, would simply be paid according to the express terms of the ERISA governed plan itself.

The First Circuit just got into the act at the end of last week, with a detailed ruling on the collision of QDROs, retirement benefits, divorce proceedings, and jurisdictional issues. To me, the most interesting aspect of the case concerns the court’s discussion of the power of the state probate court to resolve this issue, and the court’s suggestion that a parallel, but separate, federal action over the enforcement and interpretation of a QDRO is, at a minimum, not an approach the court favors. Rather, the First Circuit emphasized that the state probate court has jurisdiction to determine whether a particular order qualifies as a QDRO and to thereafter enforce it, and that this particular issue does not have to be severed off from a particular probate court/divorce action and brought to federal court. The operative words of the court were:

Geiger [the party complaining about the QDRO] argues that state courts do not have jurisdiction to determine whether domestic relations orders are QDROs . . .Geiger cites no cases in support of his position. Instead he relies on what he calls the "unambiguous language" of ERISA, specifically, 29 U.S.C. § 1132(e)(1), which provides that federal courts "have exclusive jurisdiction over civil actions under this subchapter brought by a . . . participant," with the exception that state courts have concurrent jurisdiction over actions brought to recover benefits or enforce or clarify rights under a plan. 29 U.S.C. § 1132(a)(1)(B). In Geiger's view, this is the beginning and the end of the inquiry. His view, however, has been rejected by several courts. See e.g., Scales v. Gen. Motors Corp., 275 F. Supp. 2d 871, 876-77 (E.D. Mich. 2003) ("[S]tate courts have concurrent jurisdiction regarding the interpretation of QDROs . . . and are fully competent to adjudicate whether their own orders are QDROs."); In re Marriage of Oddino, 939 P.2d 1266, 1272 (Cal. 1997)(action to qualify domestic relations order is an action to "obtain or clarify benefits claimed under the terms of a plan," and thus within state courts' jurisdiction); Robson v. Elec. Contractors Ass'n Local 134, 727 N.E.2d 692, 697 (Ill. App. Ct. 1999) ("[S]tate and federal courts have concurrent subject matter jurisdiction to construe the ERISA provisions relating to a QDRO . . . ."); Eller v. Bolton, 895 A.2d 382, 393 n.6 (Md. App. 2006) ("State and federal courts have concurrent jurisdiction to review a plan's qualification of a state domestic relations order . . . .").

Geiger acknowledges the one-sidedness of the caselaw, but argues that the rationale set forth by those decisions both violates ERISA's plain language and is "logically senseless." We do not agree. In our view, it is significant that Congress has expressly exempted QDROs from ERISA's general preemption of state law. 29 U.S.C. 1144(b)(7). We are further persuaded that, "separate litigation of the QDRO issue in federal court presents the potential for an expensive and time-consuming course of parallel litigation . . . in the two court systems." Oddino, 929 P.2d at 1274-75. And finally, we share the view of the Oddino court that: Congress, having given state courts the power to issue orders determining and dividing marital rights in retirement plans, would require a separate federal court proceeding to decide whether the order is a QDRO. This would cause undue hardship, expense and delay to the affected party, and impose an unnecessary workload on already overburdened federal courts.

The case is Geiger v. Foley Hoag LLP Retirement Plan, and you can find it here. And you can find S. COTUS’ take on another central aspect of the case - various federal abstention and civil procedure issues - here, at Appellate Law & Practice.