Estate of Altobelli v. International Business MacHines Corp. ( 1996 )

Filed: March 20, 1996
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 94-1592
(CA-93-3930-Y)
Estate of Thomas Angelo Altobelli,
Plaintiff - Appellee,
versus
International Business Machines Corporation,
Defendant - Appellant.
O R D E R
The Court amends its opinion filed February 28, 1996, as
follows:
On page 7 -- "Wilkinson, Circuit Judge, dissenting" is cor-
rected to read "Wilkinson, Chief Judge, dissenting."
For the Court - By Direction
/s/ Bert M. Montague
Clerk
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
ESTATE OF THOMAS ANGELO
ALTOBELLI,
Plaintiff-Appellee,
v.
INTERNATIONAL BUSINESS MACHINES
CORPORATION,
Defendant-Appellant,
and No. 94-1592
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA,
Defendant,
and
HELEN V. DIETSCH, formerly known
as Helen V. Altobelli,
Third Party Defendant.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Joseph H. Young, Senior District Judge.
(CA-93-3930-Y)
Argued: October 31, 1995
Decided: February 28, 1996
Before WILKINSON, Chief Judge, and WIDENER and ERVIN,
Circuit Judges.
Affirmed by published opinion. Judge Ervin wrote the opinion, in
which Judge Widener joined. Chief Judge Wilkinson wrote a dissent-
ing opinion.
_________________________________________________________________
COUNSEL
ARGUED: John Mark Vine, COVINGTON & BURLING, Washing-
ton, D.C., for Appellant. Alan Barry Sternstein, SHULMAN, ROG-
ERS, GANDAL, PORDY & ECKER, P.A., Rockville, Maryland, for
Appellee. ON BRIEF: Jeffrey G. Huvelle, Michael R. Bergmann,
COVINGTON & BURLING, Washington, D.C., for Appellant.
_________________________________________________________________
OPINION
ERVIN, Circuit Judge:
International Business Machines Corporation ("IBM") appeals the
award of benefits to the estate of a deceased employee under a plan
governed by the Employee Retirement Income Security Act of 1974
("ERISA"), 29 U.S.C. §§ 1001-1461 (1988). We must determine
whether an ERISA participant's ex-spouse can waive, in a separation
agreement incorporated into a divorce decree, her interest as a benefi-
ciary in pension-plan proceeds. We hold that she can, and did. There-
fore we affirm.
I.
From October 13, 1969, until his death on June 14, 1993, Thomas
Altobelli worked for IBM and participated in two IBM-sponsored
employee pension benefit plans. Altobelli did not designate a benefi-
ciary under either plan, but designated his ex-wife, Ms. Helen
Dietsch, as the beneficiary of his IBM Group Life Insurance Plan.
The pension plans provide that, if the participant does not designate
a beneficiary, the default beneficiary is the person named in the life
insurance plan.
Altobelli and Dietsch divorced on December 27, 1985. They incor-
porated into the divorce decree a Voluntary Separation and Property
2
Settlement Agreement, which provided that Dietsch surrendered any
rights in Altobelli's IBM plans:
"All of the following property is hereafter the sole and
exclusive property of the Husband, and the Wife hereby
waives and transfers to the Husband any interest that she
may have in the property:
***
(g) Husband's IBM pension and other deferred compen-
sation plans, if any."
Altobelli likewise surrendered any rights he had in Dietsch's IBM
plans:
"All of the following property is hereafter the sole and
exclusive property of the Wife, and the Husband hereby
waives and transfers to the Wife any interest that she may
have in the property:
***
(g) Wife's IBM pension and other deferred compensa-
tion plans, if any."
Both parties signed the agreement and their signatures were notarized.
Altobelli did not designate a new beneficiary under either the pen-
sion plans or the life insurance plan. After he died, IBM notified his
estate's representative that it intended to distribute the pension-plan
proceeds to Dietsch, despite the separation agreement, because she
still was the default beneficiary under the plans' terms. The estate
responded by bringing this action for a Declaratory Judgment, claim-
ing that Dietsch had waived her interest in both the life insurance pro-
ceeds and the pension-plan proceeds. Dietsch intervened as a
defendant, but contested only the estate's claim to the life insurance
proceeds. Agreeing that the facts were undisputed, the parties moved
for summary judgment.
3
The district court determined that Dietsch was entitled to the life
insurance proceeds, but that she had waived her interest in the
pension-plan proceeds. It awarded the pension-plan proceeds to the
estate. The estate elected not to appeal the disposition of the insurance
proceeds, and Dietsch does not contest the finding of waiver regard-
ing the pension-plan proceeds. But IBM timely appealed, arguing that
it must administer the pension plans only according to their terms,
without regard to the separation agreement.
II.
Summary judgment is proper if "there is no genuine issue as to any
material fact." E.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986) (quoting Fed. R. Civ. P. 56(c)). Since both parties agree that
the facts are undisputed, summary judgment is appropriate in this
case. This Court reviews a grant of summary judgment de novo.
Higgins v. E.I. DuPont de Nemours & Co., 863 F.2d 1162, 1167 (4th
Cir. 1988).
III.
The issue before this court is whether a divorced spouse, who was
the designated beneficiary under her ex-husband's ERISA plan, effec-
tively waived her benefits via a marital settlement agreement that was
incorporated into a divorce decree. ERISA does not address this topic
directly, so federal courts may resolve it by developing federal com-
mon law. See Phoenix Mut. Life Ins. Co. v. Adams, 30 F.3d 554, 562
(4th Cir. 1994).
IBM presents two arguments to support its position that the waiver
should be ineffective. First, it notes that one of ERISA's purposes is
to facilitate "uniform, uncomplicated administration" of pension
plans. Krishna v. Colgate Palmolive Co., 7 F.3d 11, 16 (2d Cir. 1993).
ERISA expressly requires that the plan be administered "in accor-
dance with the documents and instruments governing the plan." 29
U.S.C. § 1104(a)(1)(D) (Supp. II 1990). IBM interprets that require-
ment to mean that a plan administrator should be required to look
only to the plan to discharge his duties. Second, IBM contends that
the anti-alienation clause required by ERISA prohibits a plan benefi-
ciary from waiving her benefits. ERISA mandates that "[e]ach pen-
4
sion plan shall provide that benefits under the plan may not be
assigned or alienated." 29 U.S.C. § 1056(d)(1) (1988). The IBM pen-
sion plans comply with that provision.
Several other circuits have addressed the issue of waiver by a bene-
ficiary. On facts very similar to this case, the Seventh Circuit decided
that a nonparticipant beneficiary can waive her benefits through spe-
cific language in a divorce settlement. Fox Valley & Vicinity Constr.
Workers Pension Fund v. Brown, 897 F.2d 275, 280-81 (7th Cir.) (en
banc), cert. denied, 498 U.S. 820 (1990). The anti-alienation clause,
the court determined, is a spendthrift device intended to ensure that
employees' accrued benefits are available for retirement: "These pro-
visions focus on the assignment or alienation of benefits by a partici-
pant, not the waiver of a right to payment of benefits made by a
designated beneficiary." Id. at 279.
The Eighth Circuit did not address the anti-alienation clause, but
held that an ex-spouse can waive pension benefits in a divorce settle-
ment if the waiver specifically refers to and modifies the beneficiary
interest. Lyman Lumber Co. v. Hill, 877 F.2d 692, 693-94 (8th Cir.
1989). The Tenth Circuit agreed, holding that the beneficiary designa-
tion on file only controls absent a divorce decree dictating otherwise.
Metropolitan Life Ins. Co. v. Hanslip, 939 F.2d 904, 907 (10th Cir.
1991).
Two circuits disagree. The Sixth Circuit, like the Eighth and Tenth
Circuits, did not address the anti-alienation clause, but held that a
divorce settlement cannot effectively waive pension plan benefits
because the plan administrator is to consider only the designation on
file. McMillan v. Parrott, 913 F.2d 310, 311-12 (6th Cir. 1990). To
look at other documents, it believed, would be unnecessarily burden-
some. Id.; accord Krishna v. Colgate Palmolive Co., 7 F.3d 11, 16
(2d Cir. 1993) ("It would be counterproductive to compel the Policy
administrator to look beyond those designations into varying state
laws regarding wills, trusts and estates, or domestic relations to deter-
mine the proper beneficiaries of Policy distributions.").
We agree with the Seventh Circuit that the anti-alienation clause
does not apply to a beneficiary's waiver. As the Supreme Court has
noted, the purpose of the clause is "to safeguard a stream of income
5
for pensioners (and their dependents . . . )." Guidry v. Sheet Metal
Workers Nat. Pension Fund, 493 U.S. 365, 376 (1990). To bar a
waiver in favor of the pensioner himself would not advance that pur-
pose.
We also agree that giving effect to a waiver contained in a domes-
tic relations order does not burden plan administrators in a manner
violative of ERISA. ERISA was designed to simplify plan administra-
tion as much as possible, but it still requires administrators to consider
divorce decrees to determine whether they are Qualified Domestic
Relations Orders,* which are enforceable. 29 U.S.C.
§ 1056(d)(3)(G)(i) (1988). Thus, as the Seventh Circuit determined,
"[n]o such additional burdens will be imposed" by enforcing waivers.
Fox Valley, 897 F.2d at 282.
In this case, each party clearly intended to relinquish all interests
in the pension plans of the other. Congress's provision for QDROs
reveals that, in some situations, it deems the intent of the parties suffi-
ciently important to override the policy of simplified administration.
Because enforcement of a divorce agreement's specific waiver of
ERISA pension-plan benefits would require no marginal infringement
of that policy beyond the infringement already necessitated by the
QDRO provision, and since ERISA does not directly address the
issue, we join the Seventh Circuit in holding as a matter of federal
common law that such a waiver is to be given full effect.
_________________________________________________________________
* We refer to QDROs only to point out that there are situations when
ERISA requires plan administrators to consult documents outside the
plans themselves. The estate asks us to address them in greater depth,
arguing that the divorce order in this case was a QDRO. IBM responds
that the estate did not make that argument below and thus is precluded
from doing so here. We will not consider an issue not raised below
absent "exceptional circumstances." United States v. One 1971
Mercedes-Benz, 542 F.2d 912, 915 (4th Cir. 1976); accord, e.g.,
Maryland Dep't of Human Resources v. Department of Agriculture, 976
F.2d 1462, 1473-74 (4th Cir. 1992); Bakker v. Grutman, 942 F.2d 236,
242 (4th Cir. 1991) (requiring "denial of fundamental justice"). There
certainly are no exceptional circumstances in this case, since our decision
on other grounds favors the estate, so we do not address whether the
order was a QDRO.
6
IV.
Dietsch specifically waived, in her marital settlement agreement,
any interest she had in her husband's pension plans. Because we hold
that her waiver is effective, we affirm the district court's order award-
ing the pension benefits to Altobelli's estate.
AFFIRMED
WILKINSON, Chief Judge, dissenting:
The majority decides this case on grounds of federal common law
when it need look no further than the terms of the statute. As we have
explained, "resort to federal common law generally is inappropriate
when its application would conflict with the statutory provisions of
ERISA." Singer v. Black & Decker Corp., 964 F.2d 1449, 1452 (4th
Cir. 1992). Here, the equities of the majority's disposition seem
tempting, but ERISA's provisions compel a contrary outcome. Fear-
ing the long term consequences of replacing rules of Congress with
our own, I respectfully dissent.
ERISA requires that plan administrators perform their obligations
"in accordance with the documents and instruments governing the
plan." 29 U.S.C. § 1104(a)(1)(D). This simple statutory directive
requires that we heed the beneficiary designation on file with IBM's
pension plans. There is no question that Helen Dietsch is the desig-
nated beneficiary in those plans. While Altobelli never expressly
named a beneficiary, the plan documents stipulate that absent specifi-
cation "the beneficiary shall be deemed to be the beneficiary under
the IBM Group Life Insurance Plan." The beneficiary under Altobel-
li's life insurance plan, and hence also his pension plans, is Helen
Dietsch.
IBM's pension plans allow participants to designate or change a
beneficiary: "Such designation or change of designation shall be in
writing in a form satisfactory to the Plan Administrator and shall be
submitted to the Company's Payroll Department and shall be effec-
tive upon receipt by that Department." Following Altobelli's divorce
from Dietsch, however, he did not specify a new beneficiary under his
7
pension plans, nor did he remove Dietsch as the beneficiary under his
life insurance plan. Thus, according to the "documents and instru-
ments governing the plan," 29 U.S.C. § 1104(a)(1)(D), the beneficiary
of Altobelli's pension plans is and always has been Helen Dietsch. In
short, the "clear statutory command, together with the plan provi-
sions, answer the question; the documents control," McMillan v.
Parrott, 913 F.2d 310, 311-12 (6th Cir. 1990), and those documents
name Dietsch.
Sound reasons support the statutory rule of assigning benefits in
accordance with plan documents. Heeding "the federal rule favoring
beneficiary designations filed with a plan administrator" promotes the
"strong interest in uniform, uncomplicated administration of ERISA
plans." Krishna v. Colgate Palmolive Co., 7 F.3d 11, 16 (2d Cir.
1993); see also Fox Valley & Vicinity Construction Workers Pension
Fund v. Brown, 897 F.2d 275, 283 (7th Cir.) (en banc) (Easterbrook,
J., dissenting), cert. denied, 498 U.S. 820 (1990). "[R]eliance on the
face of written plan documents" also furthers another of ERISA's
central goals, that of "enabling beneficiaries[and employees] to learn
their rights and obligations at any time." Curtis-Wright Corp. v.
Schoonejongen, 115 S. Ct. 1223, 1230 (1995). Strict adherence to
§ 1104(a)(1)(D) ensures that all interested parties, including partici-
pants, beneficiaries, and plan administrators, can identify their rights
and duties with certainty, a primary objective of ERISA. Parrott, 913
F.2d at 312. This in turn limits costly disputes over the effect of out-
side documents on the distribution of plan benefits. See id.Because the majority ignores the beneficiary designation on file
with the IBM plans, its approach compromises the principles underly-
ing § 1104(a)(1)(D). Forcing plan trustees to examine a multitude of
external documents that might purport to affect the dispensation of
benefits frustrates the statutory goals of efficiency in administration
and certainty in expectations. See Krishna, 7 F.3d at 16. The costs
associated with these inefficiencies might well "lead those employers
with existing plans to reduce benefits, and those without such plans
to refrain from adopting them." Fort Halifax Packing Co. v. Coyne,
482 U.S. 1, 11 (1987). And uncertainties over the interpretation of
external documents will produce conflicts among parties asserting
rights to plan benefits, miring plan assets in expensive litigation.
8
These concerns are not alleviated by construing the majority's rul-
ing to apply only to beneficiary waivers in divorce decrees. Interpret-
ing those decrees will cause problems for plan administrators. For
instance, waiver provisions are often sweeping in their terms, leaving
their precise effect on plan benefits unclear. See Equitable Life Assur-
ance Soc'y v. Stitzel, 445 A.2d 523 (Pa. Super. 1982) (waiver of "any
and all claims . . . of whatsoever kind or nature" found not to waive
claim to beneficiary interest in life insurance plan). Even when facing
waiver terms that reference the affected plans, plan administrators
will have to assess whether the waiver is executed with sufficient
specificity to trump the beneficiary designation in the plan docu-
ments. Courts have reached contradictory conclusions in such situa-
tions. Compare Lyman Lumber Co. v. Hill, 877 F.2d 692 (8th Cir.
1989) (term stating that husband "shall have as his own, free of any
interest of [his wife], his interest in the profit-sharing plan of his
employer" held not to waive wife's beneficiary interest in plan), with
Fox Valley, 897 F.2d at 275 (term stating that the parties "waive any
interest or claim in and to any retirement, pension, profit-sharing
and/or annuity plans resulting from the employment of the other
party" held to waive wife's beneficiary interest in pension plan). Forc-
ing plan trustees to make such determinations will only complicate
plan administration and will leave all parties unsure of their rights and
obligations. The better rule is the one dictated by the statute -- to
honor the designations on file with the plan documents.
The majority contends that examining the enforceability of waiver
provisions in divorce decrees will not unduly compromise plan
administration because plan trustees already must review divorce
decrees to determine whether they constitute Qualified Domestic
Relations Orders ("QDROs").* 29 U.S.C. § 1056(d)(3)(G)(i). I cannot
_________________________________________________________________
* QDROs were designed as a narrow exception to ERISA's general
prohibition on alienation or assignment of benefits, 29 U.S.C. §
1056(d)(1), to allow the attachment of an employee's pension benefits to
satisfy his or her family support obligations. See S. Rep. No. 575, 98th
Cong., 2d Sess. 18-19, reprinted in 1984 U.S.C.C.A.N. 2547, 2564-65.
The divorce decree at issue here is not a QDRO. A QDRO exists when,
among other things, a participant assigns benefits to an "alternate payee,"
defined as a "spouse, former spouse, child, or other dependent of a par-
ticipant." 29 U.S.C. § 1056(d)(3)(K). Here the participant did not attempt
to assign his benefits to his former spouse or any other alternate payee;
rather, the former spouse attempted to waive her rights in favor of the
participant.
9
agree. Congress was concerned with the very problems that face us
here when it defined the requirements to establish a QDRO, and it
took pains to assure that enforcement of QDROs would not produce
inefficiency and uncertainty. To constitute a QDRO, a divorce decree
must "clearly specif[y]" the identity of any benefit recipient, the par-
ticular plans affected, and the exact manner of calculating the amount
of benefits to be paid. See 29 U.S.C. § 1056(d)(3)(C). "The require-
ment of clear specification is designed to spare the plan administrator
from litigation-fomenting ambiguities as to who the beneficiaries des-
ignated by the divorce decree are," Metropolitan Life Ins. Co. v.
Wheaton, 42 F.3d 1080, 1084 (7th Cir. 1994), and to ensure that "the
decree provides an administrator with information needed to process
a claim efficiently so that assets are preserved and beneficiaries' inter-
ests are served," Carland v. Metropolitan Life Ins. Co., 935 F.2d
1114, 1122 (10th Cir.), cert. denied, 502 U.S. 1020 (1991). ERISA
also requires that all plans develop written procedures for determining
whether a divorce decree is a QDRO. See 29 U.S.C.
§ 1056(d)(3)(G)(ii). The statute contains no similar precautions to
assure efficiency in plan administration with respect to non-QDRO
divorce decrees.
In sum, I agree with the Second and Sixth Circuit's approach to
this question. Krishna, 7 F.3d at 11; Parrott, 913 F.2d at 310. Plans
should be administered "in accordance with the plan documents," not
extraneous ones. What seem like small equitable steps in a particular
case may lead to large administrative headaches in the aggregate.
IBM sought nothing more than to administer its plan as the statute and
the plan require. I am surprised that this court would prohibit it from
doing so. I would reverse the judgment.
10