A survey of significant QDRO case law in Florida.

• Author: Lundy, Matthew L.
• Position: Family Law

The Employee Retirement Income Security Act of 1974 (ERISA) was promulgated in an effort to, among other things: 1) ensure minimum standards for the funding of pensions, 2) curb the ability of employers to alienate their employees' retirement monies, and 3) curb the ability of employees and third-party creditors to access an employee's pension. (1) In creating ERISA, the legislature may have overcompensated with its initial incarnation; that is to say, in creating the anti-alienation provisions of ERISA, the plain language of ERISA made it extremely difficult for former spouses and other dependants to access an employee's ERISA-qualified retirement account. In effect, this difficulty provided employees with a potential windfall in family law cases because they could either defer income into ERISA-protected accounts, or they could defer retiring in an effort to avoid collection. Further, courts could not necessarily order direct payment from the plan to the nonemployee former spouse. (2)

By virtue of these domestic relations law issues, judges issued rulings that attempted to balance the needs of the employees' former spouses and children with qualified retirement accounts against the plain language of ERISA. (3)

In 1984, Congress amended ERISA with the Retirement Equity Act of 1984 (REAct). (4) The passage of REAct included many innovations in the law, including the creation of the qualified domestic relations order, or "QDRO." (5) Pursuant to ERISA, "[e]ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated." (6) The primary impact of REAct in reversing the windfall effect of ERISA's anti-alienation provisions is contained in the following language:

Paragraph (1) shall apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a participant pursuant to a domestic relations order, except that paragraph (1) shall not apply if the order is determined to be a qualified domestic relations order. Each pension plan shall provide for the payment of benefits in accordance with the applicable requirements of any qualified domestic relations order. (7)

QDROs have gone from an obscure legal mechanism to a relatively common, often misunderstood, tool in domestic relations law. This article is designed to survey the evolution of the domestic relations law in the state of Florida related to the QDRO.

The 1980s

The term "QDRO" was not used in any Florida Supreme Court or appellate-level case during the entirety of the 1980s. Presumably, the lack of usage had to do with the relative obscurity of qualified domestic relations orders. The courts were, however, tackling issues related to retirement accounts that would later affect the use of QDROs. More specifically, the courts were wrestling with how to value and properly determine the marital portion of retirement accounts. As of the 1980s, the traditional pension plan was far more common than the 401(k), which was only just created in 1981. Pensions are notoriously more complicated than 401(k)s in terms of valuation, and, thus, these cases laid an important groundwork for later cases dealing with valuation of QDROs.

In Diffenderfer v. Diffenderfer, 491 So. 2d 265 (Fla. 1986), the Florida Supreme Court established that a vested and matured retirement account was not merely a source of income for the purposes of establishing support, but also a piece of marital property that must be divided. (8) The court further held that:

while reduction to present value may often best ensure an equitable distribution of property, we cannot say it would do so in every case. As in calculating an award of alimony or maintenance, "[t]he court may consider any other factor necessary to do equity and justice between the parties." [section] 61.08, Fla. Stat. (1985). The wealth of the parties, their future prospects, the duration of the marriage and each party's contribution to the marriage, among other factors, will bear on the question. (9)

In Reyher v. Reyher, 495 So. 2d 797 (Fla. 2d DCA 1986), the Second District reiterated the Supreme Court's point in Diffenderfer that the marital portion of a pension is divisible in equitable distribution of property and the nonmarital portion is not. (10) The court also noted, however, that the nonmarital portion of a pension may be considered in a determination of the appropriate award of alimony. (11)

Trant v. Trant, 545 So. 2d 428 (Fla. 2d DCA 1989) narrowed the issue of valuation. Specifically, family court attorneys dealing with pensions too frequently failed to understand the valuation process, even though the valuation of a pension could have a dramatic impact on the parties' equitable distribution scheme. In the Trant case, the husband participated in the...