Chapter 12 PENSIONS AND QDROS

JurisdictionNew York

Chapter Twelve

Pensions and QDROs

I. Pension Benefits and Death Benefits are Distinct: Federal Law Preemption

In Silber v. Silber,2616 the Court of Appeals summarized the preemptive governance of federal pension laws:

The Employee Retirement Income Security Act of 1974 (29 USC § 1001 et seq. [ERISA]) is a comprehensive federal statute "designed to promote the interests of employees and their beneficiaries in employee benefit plans" (McCoy v. Feinman, 99 N.Y.2d 295, 304 n.3, 755 N.Y.S.2d 693, 785 N.E.2d 714 [2002]). ERISA provides "a uniform administrative scheme, which provides a set of standard procedures to guide processing of claims and disbursement of benefits" (Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 148, 121 S. Ct. 1322, 149 L.Ed.2d 264 [2001], quoting Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 9, 107 S. Ct. 2211, 96 L. Ed.2d 1 [1987]). In furtherance of the goal of uniformity, ERISA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" (29 USC § 1144[a]; see also Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45–46, 107 S. Ct. 1549, 95 L.Ed.2d 39 [1987]).
A state law is related to plan administration, and thus preempted by ERISA, if the law "has a connection with or reference to such a plan" (Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97, 103 S. Ct. 2890, 77 L.Ed.2d 490 [1983]). Thus, where a state statute purports to designate the beneficiaries of an ERISA plan in a manner not provided under the ERISA scheme, it will be preempted (see Egelhoff, 532 U.S. at 148, 121 S. Ct. 1322, 149 L.Ed.2d 264).

When a party's entitlement to a portion of the other's monthly pension benefits is a right created pursuant to an agreement, the Supreme Court's order issuing a qualified domestic relations order (QDRO) is merely a recognition of such right.2617 Accordingly, a QDRO is "made pursuant to a State domestic relations law."2618 The submission of a QDRO is not a separate action, nor is the entry of a QDRO a form of relief itself; rather, it is a means to carry out the equitable distribution of marital property.2619 A QDRO is merely a mechanism by which to effectuate payment of a party's share in a retirement plan.2620

Pension laws are strictly enforced and unforgiving. The contractual division and distribution of pension and retirement benefits, governed under ERISA, requires maximum caution in identifying and specifying rights in the drafting. It is critical that in the event a federal statute facially clashes with a state statute, the federal statute must prevail;2621 similarly, parties may not contract out of the federal legislation. In sum, ERISA supersedes all state law.

ERISA's preemption provision is very broad: ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title." 29 U.S.C. § 1144(a) (1988). Under this provision, pension plan regulation is made an exclusively federal concern. Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 44–46, 107 S. Ct. 1549, 1551–52, 95 L.Ed.2d 39 (1987). . . . In order to determine which party is entitled to receive benefits under the Plan, we must first consider the statutory language of ERISA (Pilot Life Insurance Co., 481 U.S. at 57, 107 S. Ct. at 1558). 2622

In Hallingby v. Hallingby,2623 the U.S. District Court for the Southern District underscored:

The Preemption Clause is not limited to state laws specifically designed to affect employee benefit plans. . . . A state law of general application, with only an indirect effect on an ERISA-governed plan, may nevertheless be considered to "relate to" that plan for preemption purposes. . . . State laws that provide an alternative cause of action to collect benefits protected by ERISA are among those laws that are preempted. ERISA's civil enforcement remedies are intended to be exclusive remedies for enforcing rights in ERISA-governed plans. . . . Thus, "any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted." . . . ERISA therefore preempts state law causes of action that aim "to recover benefits due to [the plaintiff under the terms of the] plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 2624

The distribution of a private nongovernmental plan requires a separate QDRO. The message from pension cases is painfully clear: if the rights are not specifically identified in the agreement, no umbrella will shield the omitted benefit, and no inferences will be drawn. A court cannot issue a QDRO more expansive or encompassing rights not provided in the underlying stipulation.2625 The prohibition against granting a QDRO more expansive than the underlying written separation agreement holds true regardless whether the parties or their attorneys approved the QDRO without objecting to the inconsistency—the court has the authority to vacate or amend the QDRO to reflect the agreement.2626

Although a stipulation may fail to identify the party responsible for submitting the proposed QDRO, it is generally the responsibility of the party seeking approval of the QDRO to submit it to the court with notice of settlement.2627

A proper QDRO obtained pursuant to a stipulation of settlement can convey only those rights to which the parties stipulated as a basis for the judgment, because an alternative result would undermine litigants' freedom of contract by allowing QDROs to create new rights—or litigants to generate new claims—unexpressed in the settlement stipulation.2628 When the QDRO conflicts with the stipulation of settlement upon which it was based, the stipulation of settlement controls;2629 courts possess the authority to amend the QDRO to accurately reflect the provisions of the stipulation pertaining to the pension benefits.2630 Because a QDRO is derived from the bargain struck by the parties at the time of the judgment of divorce, there is no need to commence a separate "action" in order for the court to formalize the agreement between the parties in the form of a QDRO.2631

A written order must conform strictly to the court's decision, and when there is an inconsistency between a judgment and the decision upon which it is based, the decision controls and may be corrected either by way of a motion for resettlement or on appeal.2632 When a QDRO conflicts with a decision and the judgment upon which it was based, the decision and the judgment control and the QDRO must be modified accordingly.2633 A motion to vacate and amend a QDRO does not constitute the commencement of an action for breach of contract and is thus not barred by the six-year statute of limitations applicable to breach of contract actions.2634

A court retains its discretionary power to vacate its own judgment for sufficient reason and in the interests of substantial justice.2635 Although a court has inherent power to exercise control over its judgments, such control is not plenary and should be resorted to only to relieve a party from judgments taken through fraud, mistake, inadvertence, surprise or excusable neglect.2636 In Jordan v. Premo,2637 the Fourth Department held that the Supreme Court had properly invoked its "inherent power to exercise control over its judgments" in granting the plaintiff's motion to reopen the underlying divorce action to address the issue of her entitlement to a share of the defendant's pension because she had submitted evidence establishing that the parties agreed that she would receive her share of the defendant's pension in accordance with the formula set forth in Majauskas v. Majauskas,2638 but that the divorce judgment prepared by the defendant's attorney did not include this provision.

The Court of Appeals has underscored that the general term "pension benefits" means pension benefits and none other: "pension benefits and death benefits are two distinct matters," so "that reference to a pension plan or pension benefits will not be deemed to include death benefits," survivor benefits, pre-retirement benefits, or post-retirement benefits.2639 In the absence of any provision in the parties' stipulation requiring the defendant to elect a retirement option which would provide a continuing retirement allowance to the plaintiff in the event that the defendant pre-deceased her after retirement, he was not obligated to do so because the death benefit provided by N.Y. Retirement and Social Security Law § 657 is separate and distinct from the retirement allowance.2640

In McCoy v. Feinman,2641 the agreement provided that the pension was to be distributed pursuant to the Majauskas2642 formula; the appeals court limited the reading to the pension plan only:

Majauskas governs equitable distribution of all pension-related benefits—both retirement and survivorship—earned during the marriage. Parties to a matrimonial action might agree that Majauskas will govern equitable distribution of an employee-spouse's pension benefits, yet also agree that the nonemployee spouse will receive only retirement benefits and not preretirement death benefits . . . [the] mere mention of Majauskas does not by itself establish the parties' intent to allocate those benefits. Likewise, a stipulation's conclusory representation that the parties agreed to allocate to the nonemployee spouse "all the benefits available * * * under the applicable section of the Internal Revenue Code"—which authorizes but does not mandate assignment of survivor benefits (see 26 USC § 414[p])—does not evince the parties' intent to distribute each such benefit. . . . [The stipulation] did not cover preretirement death benefits, it did not entitle plaintiff to receive those benefits. 2643

Citing McCoy, the Appellate Division held in Coulon v. Coulon2644 that the stipulation's...

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