The August 10, 2011 Court of Appeals opinion in Keefer v. Keefer involved a dispute between which of two Qualified Domestic Relations Order (QDRO) plans from Husband’s employer the parties intended to use when they entered their separation agreement.
As part of their divorce the Keefers entered a separation agreement which, in the part relevant to this appeal, read:
(ii) Pension/Retirement Benefits: Upon the Husband’s retirement, the Wife shall be entitled to share in the Husband’s International Paper retirement pension fund, which is separate and different from the 401(k) fund, in that percentage share as calculated consistent with the formula set out below:
Step One: 19.5 (Years of Service through March/07) ??? (Husband’s Total, Actual # of Years Service w/ International Paper Co./Union Camp at the date of his actual retirement)
Step Two: The above result is multiplied by 40% (percent).
Step Three: The Wife receives the resulting percentage of each monthly pension, consistent with the above calculation, at the time the Husband begins to draw payment from his International Paper retirement pension fund. (Emphasis added in italics).
After this agreement was approved by the court, the parties learned that Husband’s employer offered two QDRO plans: the shared plan or the separate plan. Under the shared plan, Wife’s payments from the plan would begin when Husband began drawing from the fund, but Wife would lose benefits on her death and the benefits would revert to Husband. Additionally, Husband’s death would terminate Wife’s benefits. Under the separate plan, which Wife preferred, Wife could elect to draw payments before Husband’s retirement, and the benefits would survive the death of Husband and/or Wife.
The parties disagreed about which method the QDRO should use to determine Wife’s benefits under Husband’s pension plan, and as a result, Wife filed a motion for court intervention. On March 27, 2009, the family court filed an order, directing the QDRO be prepared using the shared plan method. Wife filed a motion to reconsider, which the court denied.
In affirming the family court, the Court of Appeals noted that the operative language in the parties’ separation agreement indicated that Wife would begin receiving funds from Husband’s retirement at the time he began drawing from his retirement. As the Court of Appeals framed it:
“When the parties reached their agreement, to include Husband’s retirement, the parties had not discussed which QDRO model to use. The dispute about which QDRO model to use arose only after the plan administrator (International Paper or IP) informed the parties and lawyers of the two QDRO models.” Thus, the [family court] judge concluded, “it is not correct to say that this court is saddled with determining the intent of the parties regarding which QDRO to use before the two models were revealed.” The judge determined it was the role of the court to “determine which QDRO model most accurately reflects the parties’ agreement.”
The Court of Appeals agreed with the family court’s analysis of the dispute it needed to resolve. Agreeing that the parties’ agreement was more in line with the shared plan, it held:
In its review of the agreement, the family court noted the agreement provides, “[u]pon the Husband’s retirement,” “[t]he Wife receives the resulting percentage of each monthly pension,” and “at the time the Husband begins to draw payment.” Thus, the court determined “that Wife’s share of the retirement benefits would start and be received on a monthly basis,” and “she would not be able to elect to receive her share before Husband’s monthly retirement payments or benefits started.” Additionally, the court noted, “there is no ‘survivorship’ provision in the agreement similar to such language in the separate plan,” “[t]he agreement states . . . Wife’s portion is that percentage of each of Husband’s monthly benefit[s] or payment[s],” and “the agreement states that Wife ‘shall share’ in Husband’s retirement account.” Furthermore, the court noted the agreement did not contain language “that reflects that Wife would have certain options that are provided in the separate plan.” As a result, the court found the agreement language more closely mirrored the shared plan QDRO model. Additionally, both parties submitted multiple versions of the QDRO to the plan administrator, and the version accepted twice by the administrator was the shared plan model.
Therefore, based on the family court’s authority to interpret and enforce its own decrees and our review of the evidence, we find the evidence supports the family court’s determination.
QDRO’s are so confusing that many family law attorneys hire outside firms to prepare them. Entering agreements regarding division of pension benefits without knowing the various methods the opposing party’s employer will divide these benefits can result in separation agreements that are unclear–requiring subsequent litigation to interpret–or disadvantageous to one’s client.