A Case Study on Divorce, Death and Its Effects on Pensions, 401(k)s, IRAs, and Other Savings

When it comes to divorces and dividing company retirement accounts, a qualified domestic relations order (QDRO) is usually executed, giving the nonparticipant spouse an agreed-upon share of the other spouse’s plan funds. However, the situation and process is different when the nonparticipant spouse passes away first, leaving many in divorce proceedings to wonder if their ex-spouse’s share is returned to them as the plan sponsor.

The case, Anthony Cingrani Jr. v. Sheet Metal Workers’ Local No. 73 Pension Fund, found the court ruling that the passing of a taxpayer’s ex-spouse prior led to the portion of his pension, which would have been awarded to his spouse during the divorce, to return to him, effectively giving him back his full pension fund.

The Cingrani Divorce and the Pension Agreement

Since 1978, Anthony Cingrani Jr. worked as a sheet-metal worker, marrying Deborah Cingrani along the way, but ultimately divorcing her in May 2002. As agreed upon during their settlement, a QDRO was issued, awarding 50 percent of Anthony’s interests across three pension funds to his soon-to-be ex wife. His Local 73 Pension Fund would effectively kick in upon retirement.

What the QDRO failed to anticipate, however, was that Deborah might pass away before Anthony, which is exactly what happened, when his ex wife died nine years after the divorce, in February 2011. Because Anthony was still working at the time, Deborah never received any part of the pension fund hinged on his retirement.

Retirement and Application for Pension

But in 2014, when Anthony decided to retire a year later and activate his pension, he was surprised to learn that due to the 2002 QDRO between him and his deceased ex wife, his fund only would only give him 50 percent of his pension. The fund said the 50 percent that would have been given to Deborah returned to the fund. But because the QDRO failed to provide outline any actions in the event of Deborah predeceasing her ex husband, the fund automatically turned to its “default rule for QDROs,” which reads, “Upon the alternate payee’s death before benefits commenced to him or her, the alternate payee’s assigned benefit will be forfeited and will revert to the [plan/participant].”

Naturally, Anthony moved to acquire his full pension amount. In February 2015, he received an amended QDRO stating that if Deborah were to predecease him before any benefits kicked in, all of her assigned benefits would automatically revert to Anthony. The fund, however, refused to honor the amended QDRO, forcing Anthony to make an appeal, which the fund also denied, eventually leading to legal action.

Fortunately for Anthony, the court ruled in his favor, confirming the QDRO’s validity.

Prevention of QDRO Issue

Whenever QDROs are involved, the nonparticipant spouse should see to it that plan funds are awarded to the appropriate parties regardless of who passes away first. Another option is to negotiate the awarding of other marital assets with value equivalent to the plan benefits.

To learn more about this technical aspect of divorce law, talk to the legal team of Lyttle Law Firm. Call us today at (512) 215-5225.