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CCH® BENEFITS — 01/30/09

Order Awarding Pension Benefits After 30-Year “Quasi-Marriage” Constituted A QDRO: Court

from Spencer’s Benefits Reports: A court order awarding pension benefits following the dissolution of a 30-year “quasi-marriage” constituted a qualified domestic relations order (QDRO) under ERISA. This was the decision of the Ninth Circuit U.S. Court of Appeals in Owens v. Automotive Machinists Pension Trust (No. 07-35253).

For more than 30 years, Norma Owens and Phillip Owens lived together as husband and wife in a “quasi-marital” relationship in King County, Wash. Although Norma and Phillip were never legally married, they had two children, purchased a home together, and held themselves out to the public as a married couple. During their 30-year relationship, Norma and Phillip also acquired numerous joint assets, including real property, furniture, and vehicles. The Owens’ jointly acquired funds were held in various financial institutions. In addition, during their relationship, Mr. Owens acquired interests in various retirement accounts, and he provided the main financial support for the family.

In March 2004, Norma and Phillip separated. At the time of the separation, their only significant remaining asset was Phillip’s pension plan benefits under the Automotive Machinists Pension Trust. In January 2005, Phillip submitted his claim for early retirement benefits to the Automotive trust, and the trust began paying him a straight-life annuity with monthly payments of $1,906.

On Aug. 10, 2004, Norma filed a petition for distribution of property in Washington state court, asserting that she was entitled to 50% of Phillip’s monthly pension benefit payments. The court entered an order awarding Norma 50% of Phillip’s monthly benefit payments based on Norma’s “quasi-marital relationship” to Phillip. The state court certified its order as a QDRO. Then, on Oct. 14, 2005, the Automotive trust notified Norma that the state court order did not, in fact, qualify as a QDRO under ERISA and refused to pay Norma her share of the pension benefits. In response, Norma filed a declaratory judgment action in the U.S. District Court for the Western District of Washington, which held that the state court’s order was a valid QDRO because (1) it related to “marital property rights” and (2) it recognized the existence of an “alternate payee.” The Automotive trust appealed, but the Ninth Circuit affirmed the district court’s ruling.

Order Constituted A QDRO

In rendering its decision, the Ninth Circuit initially explained, “ERISA enumerates the requirements for a valid QDRO. A qualified domestic relations order is a ‘domestic relations order’ which ‘creates or recognizes the existence of an alternate payee’s right to receive benefits payable with respect to a participant under a plan.’ Automotive Trust contends that the [state court’s] order does not constitute a valid QDRO because it does not relate to ‘marital property rights’ within the meaning of ERISA section 206(d)(3)(B)(ii)(I). The trust bases its argument on the fact that Norma and Phillip were never legally married, despite the facts that the couple lived together in a quasi-marital relationship for more than 30 years; that they had and raised two children together; that they owned and maintained joint property together; and that they held themselves out to the public as a married couple.”

The Ninth Circuit went on to state, “In family law cases, state courts are authorized to create enforceable interests in the proceeds of an ERISA plan, so long as those interests comply with the QDRO provisions. The first requirement for a valid QDRO is that it relate to ‘marital property rights’ as contemplated by ERISA. Having determined that ERISA does not explicitly define ‘marital property rights,’ we turn to Washington state domestic relations law to determine the meaning of the term. The state of Washington recognizes quasi-marital relationships for purposes of property division. Norma and Phillip lived together in a quasi-marital relationship for more than 30 years. During that time, they jointly accumulated various forms of community property. The couple’s community property included jointly acquired funds, some of which were held in joint bank accounts, as well as the interest that Phillip acquired in various retirement accounts, including the Automotive Trust pension plan at issue here. Reading the relevant statutory provisions of ERISA as a whole, which requires that a QDRO be ‘made pursuant to a state domestic relations law (including a community property law),’ compels us to apply Washington state domestic relations law here. It is clear that the [state court’s] order did relate to ‘marital property rights’ because Phillip’s pension benefits comprise property that would have been characterized as community property had the parties been married.”

In conclusion, the Ninth Circuit stated, “The second requirement is whether Norma qualifies as an ‘alternate payee’ under section 206(d)(3)(K). ERISA defines the term ‘alternate payee’ as ‘any spouse, former spouse, child, or other dependent of a participant who is recognized by a domestic relations order as having a right to receive all, or a portion of, the benefits payable under a plan with respect to such participant.’ To determine whether Norma qualifies as Phillip’s ‘dependent,’ we look to the Internal Revenue Code section 152(d)(2)(H). Section 152(d)(2)(H) defines the term ‘dependent’ as ‘an individual (other than the spouse of the taxpayer) who, for the taxable year of the taxpayer, has the same principal place of abode as the taxpayer and is a member of the taxpayer’s household.’ It is undisputed that, for more than 30 years, Norma and Phillip shared ‘the same principal place of abode’ in Seattle, Washington. As the couple’s joint tax returns indicate, Norma was a member of Phillip’s household; she is listed on the couple’s tax returns as Phillip’s ‘wife.’ Because Norma qualifies as an ‘other dependent’ under IRC section 152(d)(2)(H), we find that she was properly designated as an ‘alternate payee’ under [ERISA Sec.] 206(d)(3)(K), thereby fulfilling the second requirement for a valid QDRO.”

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