Recent Change to Tennessee Statute Governing Retirement and Pension Plans Impacts Divorce Cases

An important change impacting divorce proceedings in Tennessee has been made to the Tennessee statute which governs retirement and pension plans. As of July 1, 2015, T.C.A. § 26-2-105(d)(1) now provides that “a local government that establishes and maintains for its employees a qualified plan, and the qualified plan’s administrator, shall honor claims under a qualified domestic relations order, if the order relates only to the provisions of marital property rights for the benefit of the former spouse of the qualified plan’s participant. “This is a significant change in the area of public employee law and domestic relations as, prior to this amendment, public employee pension plans did not create ‘separate interests’ for the divorcing spouse who was not the employee.” Marlene Eskind Moses with Manuel Benjamin Russ, QDRO and State/Local Government Pensions, TENN. B. JOUR., May 2016, at 30.

The term “qualified domestic relations order” (“QDRO”), as used in this statute is defined as a domestic relations order “which creates or recognizes the existence of an alternate payee’s right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan.” T.C.A. § 26- 2-105(d)(2)(B); 26 U.S.C. 414(p)(1)(A)(i).

Private pension plans are not exempt from the claims of an alternate payee under a QDRO. T.C.A. § 26-2-105(b) and (c).

T.C.A. § 26-2-105(d) amends the Tennessee Code “to require ‘local governments’ that create and utilize an employee benefit plan to honor a QDRO that affects their enrollees. The amendment does not alter the existing exemption for state public employee pension plans, and those plans retain their exemption from having to comply with QDROs.” Marlene Eskind Moses with Manuel Benjamin Russ, QDRO and State/Local Government Pensions, TENN. B. JOUR., May 2016, at 30.