December 23, 2010

Retirement benefits and divorce

Retirement benefits and divorce
Smith v NYS Police and Firefighter Retirement System, 275 AD2d 536

A divorce settlement frequently will have an impact on the distribution of retirement benefits. Typically courts have the final word on how such benefits are to be distributed under the terms of the settlement. As the Smith case demonstrates, sometimes the Comptroller will have the authority to make that determination rather than the courts.

The Qualified Domestic Relations Order [QDRO] issued when Sophie and Nicolas Smith divorced provided that the retirement benefits accrued by Nicolas Smith as a member of the New York State and Local Retirement Systems during the marriage were marital property.

Nicholas Smith later remarried and named his new spouse as his primary beneficiary for pre-retirement death benefits. Smith died in 1997. As he had not yet retired, Sophie Smith applied for the pre-retirement death benefit. The Retirement System told her that under its interpretation of the QDRO only 33.2% of the benefit was payable to her.

The Appellate Division dismissed Sophie’s challenge to this determination, pointing out that [o]nce the Comptroller determined that the Retirement System was obligated to comply with the terms of the QDRO, the only remaining issue involved the interpretation of those terms.

Ordinarily the interpretation of the terms of a court order such as a QDRO would be for the court rather than the Comptroller to resolve. Not only that, the Smith’s QDRO expressly provided that the Supreme Court had continuing jurisdiction to implement and supervise the payment of retirement benefits upon the parties’ application.

Here, however, Appellate Division decided that the courts no longer had jurisdiction to decide the issue. Why did the courts lose jurisdiction? Because, said the Appellate Division, the parties did not seek the court’s assistance in resolving the question, but elected to submit the issue to the Comptroller as part of Sophie Smith’s application for the death benefit.

Under such circumstances, said the Appellate Division, the Comptroller has the authority to resolve disputes over the interpretation of the terms of the QDRO and his determination is binding and must be upheld if it is found rational and supported by substantial evidence.

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