Under QDRO terms, ex-spouse entitled to share of participant’s post-RIF separation benefit

Under the terms of a qualified domestic relations order (QDRO), a participant’s ex-spouse is entitled to a share of a participant’s increased pension benefit received under a separation policy after a reduction in force (RIF) forced his early retirement, the U.S. Court of Appeals in Philadelphia (CA-3) has ruled.
QDRO language

Under the terms of the QDRO, the participant’s ex-spouse was entitled to the actuarial equivalent of 53% of the present value of the participant’s accrued benefit in the pension plan, as of the date of the divorce settlement. In addition, if the participant retired prior to age 65, then the amount payable to the ex-spouse must be recalculated to include 53% “of the value of any employer subsidy for early retirement.”

The participant was forced to retire at age 57 due to a company-wide reduction in force. Two changes to his pension benefit occurred at this time. First, the pension plan provided for an early retirement enhancement in recognition of years of service for eligible early retirees with more than 20 years of service with the employer. Additionally, under a separation policy known as “GP 401,” employees aged 55 and over terminated as part of the RIF and who signed a release were eligible to receive 100% of their accrued pension plan benefit that would have been available had they retired at age 65.

The plan recalculated the ex-spouse’s benefit to include the enhanced pension amount under the plan, but excluded the GP 401 amount.

The ex-spouse requested her benefits be recalculated to include the GP 401 benefit. The plan denied this request and the district court sided with the plan.

Note: The appellate court reviewed the plan’s interpretation of the QDRO—a judicially-approved contract—de novo.
“For” what?

The appellate court found for the ex-spouse, rejecting the plan’s (and the lower court’s) interpretation of the QDRO’s use of the phrase “for early retirement.” It was error for the plan to interpret the preposition “for” as meaning “on account of”—that is, the participant received the enhanced amount because he was terminated and signed a release. Instead, the correct interpretation of “for,” the court reasoned, is that it references the purpose of the subsidy, which is to provide more substantial early retirement benefits. Thus, the GP 401 benefit was a subsidy for early retirement within the meaning of the QDRO.

Source: Gruber v. PPL Retirement Plan (CA-3).

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

Visit our News Library to read more news stories.