Fourth Circuit Confirms Discretion in QDRO Cost Allocation and Declines ERISA Penalties

In Gasper v. EIDP, Inc., No. 24-1959, —F.4th—-, 2025 WL 3510832 (4th Cir. Dec. 8, 2025), the Fourth Circuit affirmed the district court’s judgment finding that the ERISA plan administrator properly interpreted a qualified domestic relations order (QDRO) and correctly calculated the participant’s monthly annuity. The court also upheld the denial of statutory penalties for the delayed production of plan documents.

Background

After his 2010 divorce, participant David Gasper’s retirement benefits under his employer’s defined benefit plan became subject to a domestic relations order (DRO), later determined to be a QDRO. The order awarded his former spouse (“Alternate Payee”) a share of his monthly annuity and designated her as a surviving spouse for purposes of the plan’s qualified joint and survivor annuity (QJSA). Critically, the QDRO stated that the alternate payee’s benefit “may be reduced as necessary to cover the cost” of the survivor annuity.

Upon retirement, the plan administrator calculated Gasper’s benefit using an actuarial reduction for the QJSA applicable to the entire annuity. Gasper argued that this “cost” should have been allocated solely to his former spouse’s portion, increasing his monthly payment by $385.26.

He also sought statutory penalties under ERISA § 502(c)(1) for alleged delays in receiving historical plan documents.

QDRO Interpretation: “May” Means Discretionary, Not Mandatory

The Fourth Circuit held that QDRO interpretation is a question of state contract law, reviewed de novo. Because the QDRO was a domestic court order—not a plan term—the plan administrator received no deference on its meaning. However, the court applied an abuse of discretion standard to the plan administrator’s exercise of discretionary authority under the plan to make calculation determinations for plan beneficiaries.

Applying North Carolina contract principles, the court found:

• The QDRO’s use of “may be reduced” unambiguously gave permission, not a requirement, to allocate survivor-annuity cost to the alternate payee.
• Elsewhere, the QDRO used “shall” to create mandatory obligations, demonstrating the parties knew how to impose a requirement when intended.
• Nothing in the QDRO prohibited allocating the actuarial reduction to the participant’s entire annuity.

Because the cost of a QJSA under the plan was solely an actuarial adjustment applied to the entire benefit—not a charge that could be assigned to a particular portion—the plan administrator reasonably applied the reduction across the full annuity. The administrator therefore did not abuse her discretion in denying Gasper the larger benefit amount.

No Statutory Penalties for Document Production

Gasper also sought penalties under ERISA § 502(c)(1), asserting that the plan administrator failed to timely provide certain historical plan documents and amendments.

The Fourth Circuit rejected this claim, noting:

• An administrator’s duty to furnish documents is triggered only by written requests—Gasper’s first request was verbal.
• The administrator reasonably responded to both of Gasper’s later written requests.
• Gasper ultimately received all requested documents during litigation, and he failed to show prejudice from any delay.
• There was no evidence of bad faith or intentional obstruction.

Given these factors, the district court acted within its discretion in denying penalties. The Fourth Circuit affirmed the district court’s award of summary judgment to the defendants.

Key Takeaways

• QDRO interpretation follows state contract law, not the deferential ERISA standard.

• A provision stating benefits “may be reduced” confers discretion, not a mandate, even in the QDRO context.

• When a plan administrator defines the QJSA “cost” as an actuarial reduction applied to the entire benefit, the administrator may reasonably apply that reduction across the whole annuity rather than isolating it to one party’s share.

• Statutory penalties for document delays require more than technical noncompliance; courts look to prejudice, responsiveness, and good faith.

• Plan administrators who timely respond to written requests and provide documents—even imperfectly—are unlikely to face penalties absent harm or intentional misconduct.