A Carluzzo Rochkind & Smith note: Following is an article by Virginia Lawyers Weekly. We did not handle this case, but it brings up important points your divorce attorney should be familiar with. For more than 20 years our divorce lawyers and domestic relations attorneys in Manassas have helped clients with such matters in Prince William County, Fairfax County, Woodbridge, and throughout Northern Virginia. If you have any questions or would like to schedule an appointment, please contact us at (703) 361-0776.
State retirement system cannot designate survivor beneficiary
By Virginia Lawyers Weekly – 12/15/2022
Where husband did not designate his wife as a survivor beneficiary on his Virginia Retirement System retirement plan despite a court order requiring him to do so, the circuit court incorrectly ordered VRS to pay survivor benefits.
Under the relevant statutes, “a court can order a party, but not VRS, to designate a survivor beneficiary.”
Overview
When Shelton and her husband divorced, the final decree provided that Shelton would get 50 percent of the marital share of husband’s VRS retirement plan. Further, husband was “directed to elect a Survivor’s Option naming [Shelton] as the contingent annuitant. Division shall be effectuated by the entry of a VSR [sic] Approved Domestic Relations Order.”
VRS received a copy of an approved domestic relations order containing the final decree’s retirement plan provisions. The VRS acknowledged receipt of the ADRO in two communications.
A VRS retirement guide advised that “[i]f a member selects an option at retirement that does not conform to the order, or fails to name the former spouse as contingent annuitant, and VRS has a copy of the order on file, VRS will notify the parties when the retirement application is filed.”
Husband prepared to retire. “On husband’s retirement application, he selected the basic benefit plan, instead of choosing a plan with a survivor benefit option.” When he retired, Shelton began receiving payments until husband’s death 20 years later.
Shelton inquired why the payments stopped. VRS said husband had not selected a retirement plan with a survivor option. Had he done so, wife would have received almost $6,300 per month.
The matter was heard by an independent fact finder, who concluded that VRS was required to pay a survivor’s benefit. VRS rejected the decision. Shelton appealed.
The circuit court “ordered that VRS provide a monthly benefit to Shelton as if husband had selected a 100% survivor benefit option and that this monthly benefit would continue until Shelton’s death. It also ordered VRS to pay Shelton’s attorney fees and costs in the amount of $25,000.”
VRS appealed.
Analysis
“[T]he circuit court ordered VRS to pay Shelton a survivor benefit after concluding that, pursuant to Code § 51.1-124.4 and Code § 20-107.3, VRS did not have the ability to ignore a court order, here the ADRO, entered pursuant to these statutes.
“On appeal, VRS argues that these statutes do not obligate VRS to provide Shelton with a survivor benefit after husband selected a retirement plan that did not include a survivor benefit. Reviewing the applicable statutes, we agree. …
“Code § 51.1-124.4(A) states that an individual’s VRS assets ‘shall not be subject to execution, attachment, garnishment, or any other process whatsoever.’” There are exceptions.
“One such exception is that ‘retirement benefits and assets created under this title which are deemed to be marital property pursuant to Chapter 6 ([Code] § 20-89.1 et seq.) of Title 20 may be divided or transferred by the court by direct assignment to a spouse or former spouse pursuant to [Code] § 20-107.3.’ …
“This statute makes clear that once a VRS retirement benefit is deemed marital property by a court during a divorce proceeding, the court may divide or transfer that retirement benefit to a former spouse pursuant to Code § 20-107.3.
“As a court may only divide or transfer a VRS retirement benefit pursuant to Code § 20-107.3, we next turn to that statute. Specifically concerning survivor benefits, Code § 20-107.3(G)(2) provides that a ‘court may order a party to designate a spouse or former spouse as irrevocable beneficiary during the lifetime of the beneficiary of all or a portion of any survivor benefit or annuity plan of whatsoever nature.’ (Emphasis added).
“In contrast, Code § 20-107.3(G)(1), which concerns pension, profit-sharing, or deferred compensation plans, provides that a ‘court may direct payment of a percentage of the marital share of any pension, profit-sharing or deferred compensation plan, or retirement benefits …that constitutes marital property.’
“Further, ‘[t]he court may order direct payment of such percentage of the marital share by direct assignment to a party from the employer trustee, plan administrator, or other holder of the benefits.” … (emphases added). …
“Therefore, under the statutory scheme, a court is permitted to order a third-party plan administrator to make direct payments of the marital share of a pension, profit-sharing, or deferred compensation plan to a former spouse.
“A court is not permitted to order a plan administrator, in this case VRS, to itself designate a member’s former spouse as the beneficiary of a survivor benefit.”
No notice
“There is no evidence in the record that either husband or Shelton was notified that husband chose a retirement plan option that was inconsistent with the ADRO. …
“Concerning the lack of notice, Shelton asserts that the VRS committed an error of law in this case because it failed to observe required procedure in not informing the parties that husband had selected a retirement plan inconsistent with the ADRO. …
“Shelton relies on … language in the VRS’s retirement guide[.] …“However, the VRS retirement guide is merely a guidance document created to provide information as to how VRS retirement benefits may be divided as part of an equitable distribution.”
A guidance document is “‘any document developed by a state agency or staff that provides information or guidance of general applicability to the staff or public to interpret or implement statutes or the agency’s rules or regulations.’ …
“[B]ecause VRS’s retirement guideline is not a formally promulgated rule or regulation and does not have the force of law, any violation of the notice provision contained in the retirement guide cannot supersede the provisions of Code § 51.1-124.4(A) and Code § 20-107.3(G)(2)[.]”
Fees
“As we reverse the circuit court’s award of a survivor benefit to Shelton, she has not ‘substantially prevail[ed]’ on the merits of the case. Consequently, we vacate the circuit court’s award of attorney fees and costs.”
Reversed.
Virginia Retirement System v. Shelton, Record No. 0434-22-2, Dec. 6, 2022. CAV (Malveaux). From the Circuit Court of the City of Richmond (Cavedo). Brian J. Goodman, Legal Affairs & Compliance Coordinator, Virginia Retirement System for appellant. Richard L. Locke for appellee. VLW 022-7-553, 14 pp.
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