In Divich v. Divich, 2003 SD 73, 665 N.W.2d 109 (S.D. 2003), the Supreme Court of South Dakota considered, among other things, the validity of a QDRO permitting the non-participant spouse to devise to her estate her portion of pension plan benefits were she to predecease the plan participant.
The parties' divorce decree incorporated the terms of a settlement agreement, which granted the non-participant former spouse a vested one-half interest in her former husband's retirement account. Id. at 111.
Payment of benefits to the wife would occur on a monthly basis. Id. She attempted to preserve her interest through a proposed QDRO that provided, "if she predeceased the husband (participant), her share of the retirement benefits would be payable to her estate." Id.
Instead, the trial court adopted a QDRO providing that, in the event the wife predeceased the husband, the wife's portion of the benefits would revert back to the husband.
The wife appealed.
Initially, the Divich Court stated that, under South Dakota's marital property laws, a retirement plan was a divisible marital asset because it represented consideration to the spouse in lieu of a higher salary. Id. at 112.
Next, the court considered Ablamis and the Ninth Circuit's discussion of ERISA's survivor annuity provisions, and concluded that, not only did the parties stipulate that the plan at issue is exempt from federal legislation, but ERISA's spendthrift provisions were not applicable to QDROs.
The court went on to hold that, because the grant of a share of retirement benefits is a property right, it could be paid under the terms of a QDRO to a non-participant spouse's estate should she predecease the plan participant.
The court found persuasive the wife's argument that, had the plan participant bought her out of her share of the retirement plan, she would be free to devise that money to her estate.
The court concluded that the result should not change merely because the wife was paid on a month-to-month basis instead of through a lump sum award. Id.