Rohrbeck v. Rohrbeck

CourtCourt of Appeals of Maryland
Citation318 Md. 28,566 A.2d 767
Parties, 11 Employee Benefits Cas. 2253 Joan ROHRBECK v. John ROHRBECK. 56 Sept. Term 1989.
Decision Date06 December 1989

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318 Md. 28
566 A.2d 767, 11 Employee Benefits Cas. 2253
56 Sept. Term 1989.
Court of Appeals of Maryland.
Dec. 6, 1989.

[566 A.2d 768]

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Bryan Renehan (Cynthia Callahan, Ellen L. Lee, Brodsky, Greenblatt & Renehan, Chartered, all on brief) Gaithersburg, for appellant.

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Allen J. Kruger (Alan S. Town, both on brief) Laurel, for appellee.

Argued before MURPHY, C.J., ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS, JJ., and ALAN M. WILNER, (Associate Judge of the Court of Special Appeals of Maryland, Specially Assigned).

ALAN M. WILNER, Judge, Specially Assigned.

This case turns on whether the Circuit Court for Montgomery County entered a judgment--a final, appealable judgment--on July 13, 1988. It has a broader import than that, however, and requires an examination of the nature and function of a device unknown to our courts before 1985--the Qualified Domestic Relations Order (QDRO). The precise issue before us, and the answer to it, will become more clear if we begin with a discussion of this recent addition to our jurisprudence.


In 1974, Congress passed ERISA--the Employee Retirement Income Security Act of 1974 (P.L. 93-406, 88 Stat. 829)--in order to provide better protection for beneficiaries of employee pension and welfare benefit plans abounding in the private workplace. ERISA imposed a number of requirements on these plans relating to reporting and disclosure, vesting, funding, discontinuance, and payment of benefits. These requirements were imposed through amendments to both the Federal labor code (Title 29 U.S.C.) and the Internal Revenue Code (Title 26 U.S.C.). Some of the new statutory language was added to only one or the other of those codes; some was added to both codes to ensure that employers would not receive the tax benefits accorded by "qualified" plans unless those plans met the requirements imposed principally as a matter of Federal labor policy.

One of the provisions added to both codes was an anti-alienation requirement--a "spendthrift" provision precluding plan participants from assigning or alienating their

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benefits under pension plans subject to the Act. ERISA § 206(d)(1) added § 1056(d)(1) to Title 29 U.S.C., requiring that "[e]ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated." ERISA § 1021(c) added a similar provision to the Internal Revenue Code. To the definition of "qualified trusts," it added the requirement that "[a] trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that benefits provided under the plan may not be assigned or alienated." 26 U.S.C. § 401(a)(13). 1

[566 A.2d 769] ERISA § 514, which became part of the labor code (29 U.S.C. § 1144), and to which no counterpart was added to the Internal Revenue Code, provided, with exceptions not relevant here, that the basic requirements of ERISA (including the anti-alienation requirement) "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan [subject to the ERISA requirements]." The term "State law," for purposes of § 514, includes "all laws, decisions, rules, regulations, or other State action having the effect of law, of any State." ERISA § 514(c)(1); 29 U.S.C. § 1144(c)(1) (emphasis added). The preemption provision of ERISA has been regarded by the Supreme Court as "deliberately expansive, and designed to 'establish pension plan regulation as exclusively a federal concern.' " Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987) (quoting in part from Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d 402 (1981)). See also Shaw v.

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Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983).

The combination of the anti-alienation provision in both codes and the preemption provision of ERISA § 514 eventually raised a question, apparently not anticipated by Congress, as to the validity of orders entered in State domestic relations proceedings requiring that pension benefits be paid to a person other than the plan beneficiary. The question arose in two principal contexts--attachments served on plan administrators designed to enforce previously entered orders for child or spousal support, and orders entered pursuant to State community property or equitable distribution laws actually transferring pension rights.

Although the courts and the Internal Revenue Service apparently had little problem in giving effect to the first kind of order, there was more uncertainty about the second. While considering what eventually became the Retirement Equity Act of 1984 (P.L. 98-397, 98 Stat. 1433, hereinafter referred to as REA), however, Congress decided to clarify both aspects. The Congressional concern was clearly reflected in the various House and Senate Committee Reports on the REA. The House Ways and Means Committee Report noted the uncertainty caused by the anti-alienation and preemption provisions and stated, at 18:

"Your committee believes that the spendthrift rules should be clarified by creating a limited exception that permits benefits under a qualified plan to be divided under certain circumstances. In order to provide rational rules for plan administrators, your committee believes it is necessary to establish guidelines for determining whether the exception to the spendthrift rules applies. In addition, your committee believes that conforming changes to the ERISA preemption provision are necessary to ensure that only those orders that are excepted from the spendthrift provisions are not preempted by ERISA."

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The device created to achieve these ends is the QDRO. As further explained in both the House Ways and Means and Senate Finance Committee Reports:

"The bill clarifies the spendthrift provisions of the Internal Revenue Code by providing new rules for the treatment of certain domestic relations orders. The bill creates an exception to the ERISA preemption provision with respect to these orders. The bill provides procedures to be followed by a plan administrator and an alternate payee (a child, spouse, or former spouse of a participant) with respect to domestic relations orders.

Under the bill, if a domestic relations order requires the distribution of all or a part of a participant's benefits under a [566 A.2d 770] qualified plan to an alternate payee, then the creation, recognition, or assignment of the alternate payee's right to the benefits is not considered an assignment or alienation of benefits under the plan if and only if the order is a qualified domestic relations order. Because rights created, recognized, or assigned by a qualified domestic relations order, and benefit payments pursuant to such an order, are specifically permitted under the bill, State law providing for these rights and payments under a qualified domestic relations order will continue to be exempt from Federal preemption under ERISA."

H.Rep. No. 655 at 18; S.Rep. No. 575 at 19, U.S.Code Cong. & Admin.News 1984, pp. 2547, 2565 (emphasis added). 2

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Because the anti-alienation requirement was part of both the labor and the tax codes, Congress amended both codes to provide for this limited exception. See REA § 104 (amending 29 U.S.C. § 1056(d)); REA § 204 (amending 26 U.S.C. §§ 401, 414). Both provisions begin with the statement that the anti-alienation requirement "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 [it] shall not apply if the order is determined to be a qualified domestic relations order." (Emphasis added.)

The law then defines a "qualified domestic relations order" as a domestic relations order that meets certain requirements set forth in the statute. It must first be a "domestic relations order," i.e.,

"any judgment, decree, or order (including approval of a property settlement agreement) which--

'(i) relates to the provision of child support, alimony payments, or marital property rights to a spouse, child, or other dependent of a participant, and

'(ii) is made pursuant to a State domestic relations law (including a community property law)....' "

REA §§ 104, 204; 29 U.S.C. § 1056(d)(3)(B)(ii); 26 U.S.C. § 414(p)(1)(B). It must then meet three other requirements:

(1) It must create or recognize the existence of an alternate payee's right to, or assign to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan, 29 U.S.C. § 1056(d)(3)(B)(i); 26 U.S.C. § 414(p)(1)(A);

(2) It must clearly specify:

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"(i) the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order,

(ii) the amount or percentage of the participant's benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined,

(iii) the number of payments or period to which such order applies, and

(iv) each plan to which such order applies."

29 U.S.C. § 1056(d)(3)(C); 26 U.S.C. § 414(p)(2); and

(3) It:

[566 A.2d 771] "(i) does not require a plan to provide any type or form of benefit, or any option, not otherwise provided under the plan,

(ii) does not require the plan to provide increased benefits (determined on the basis of actuarial value), and

(iii) does not require the payment of benefits to an alternate payee which are required to be paid to another alternate payee under another order previously determined to be a qualified domestic relations order."

29 U.S.C. § 1056(d)(3)(D); 26 U.S.C. § 414(p)(3).

The law requires each plan to establish "reasonable procedures to determine the qualified status of domestic relations orders and to administer...

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