Imagine the following scenario: Participant of a 401(k) plan obtains a divorce, and the divorce court enters a decree that the spouse will receive 50% of the increase in value of the account from the date of marriage until the date of divorce. The court directs the spouse’s attorney to prepare a QDRO to effectuate the terms of the divorce decree. The spouse’s attorney prepares a QDRO and submits it to the employer for processing. But before the QDRO is approved, the participant dies. The employer informs the spouse that the plan will not honor the QDRO because it has not been approved by the court. The spouse’s attorney submits the QDRO to the court and the court approves the QDRO nunc pro tunc (meaning “now for then”). The spouse then submits the QDRO to the plan for payment, only to find that the children of the deceased participant have also submitted a claim for payment of that portion of the decedent’s account, claiming that the QDRO approved by the court after the death of the participant is invalid. What should the plan fiduciaries do?

The fiduciaries of the IBM Tax-Deferred Savings Plan decided to let the court settle the controversy, and thus filed an action for interpleader to determine the proper beneficiaries of the account. (See IBM Savings Plan v. Price.) Who prevailed? The spouse, based upon a holding that as long as a QDRO meets the other statutory requirements of ERISA contained in 29 U.S.C. § 1056(d)(3), it can be issued nunc pro tunc. The court noted that the 8th, 9th and 10th Circuit had each reached the same conclusion based upon similar facts.

Was the spouse entitled to attorneys’ fees? Apparently not, since the court concluded that the children’s claim for that portion of the account under the plan were not without some merit.