McGowan v. NJR Ser Corp

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
9-13-2005
McGowan v. NJR Ser Corp
Precedential or Non-Precedential: Precedential
Docket No. 04-3620
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
NO. 04-3620
____________
JAMES M. MCGOWAN, SR.,
Appellant
v.
NJR SERVICE CORPORATION;
NEW JERSEY NATURAL GAS COMPANY
____________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil No. 03-cv-01035)
District Judge: The Honorable Stanley R. Chesler
Argued June 8, 2005
BEFORE: FUENTES, VAN ANTWERPEN and BECKER,
Circuit Judges
(Filed September 13, 2005)
Samuel J. Halpern (Argued)
443 Northfield Avenue
West Orange, NJ 07052
Counsel for Appellant
Richard C. Mariani (Argued)
Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
10 Madison Avenue, Suite 402
Morristown, NJ 07960
Counsel for Appellee New Jersey Natural Gas Company
OPINION
VAN ANTWERPEN, Circuit Judge
Appellant James M. McGowan, Sr., was employed by
Appellee New Jersey Natural Gas Company (“NJNG”) for
more than 27 years. He participated in NJNG’s Plan for
Retirement Allowances for Non-represented Employees (“the
Plan”) and initially designated his second wife, Rosemary, the
“joint and survivor contingent beneficiary.” On March 5,
2003, McGowan filed an action in the United States District
Court for the District of New Jersey, seeking declaratory
relief directing NJNG and the Plan to recognize: (1)
Rosemary’s purported waiver of her rights as beneficiary; and
2
(2) McGowan’s subsequent nomination of his present wife,
Donna, as the new beneficiary.
Whether the administrators of a retirement plan that is
covered by the Employee Retirement Income Security Act of
1974 (“ERISA”), 29 U.S.C. §§ 1001, et seq., are required to
recognize an individual’s waiver of her beneficiary interest
under the plan is an issue of first impression in this Circuit,
and there is a split among the courts of appeals that have
considered the issue. The District Court below denied
McGowan’s motion for summary judgment and granted
summary judgment in favor of NJNG. The court held that
Plan administrators are not required to look beyond Plan
documents to determine whether a waiver has been
effectuated in a private agreement between the participant and
his named beneficiary. For the reasons set forth below, we
will affirm.1
I. FACTUAL AND PROCEDURAL HISTORY
McGowan was employed by NJNG from May 12,
1969, until his retirement on November 30, 1996. As of the
date of his retirement, McGowan was married to his second
wife, Rosemary Byrne. Shortly before his retirement,
McGowan elected to receive his retirement benefits in the
1
Although this Opinion represents the Opinion of the Court
in affirming the lower court’s decision, Judge Becker has
declined to join in the reasoning contained in Part III.A.1, infra.
See Concurring Op. at 22.
3
form of an “automatic surviving spouse option,” creating a
50% survivor annuity for Rosemary. This election remained
in effect when he began receiving benefits in 1996.
McGowan and Rosemary were divorced in Palm Beach
County, Florida, on May 24, 1999. On July 23, 1998, prior to
the formal entry of the divorce, they entered into a Marital
Settlement Agreement, which was later incorporated into the
final judgment of dissolution. The agreement stated that
Rosemary “waives any and all rights, title, interest or claims .
. . to all bank accounts, life insurance policies and any right to
the New Jersey Gas Company Employee Pension Plan of the
Husband.” (App. at A61.) Shortly after Rosemary signed this
purported waiver, McGowan contacted the Plan to change the
named survivor beneficiary. On July 27, 1998, Rosemary
signed a form consenting to the election of McGowan’s first
wife, Shirley McGowan, as the replacement beneficiary.
In an August 6, 1998, letter, the Plan’s benefits
manager, Nancy Renner, informed McGowan that the Plan
did not permit changes to his prior contingent beneficiary
election once he started receiving benefit payments.
Notwithstanding the Plan’s denial of his initial request,
McGowan sought to change beneficiaries again after his
marriage to his current wife, Donna McGowan, on November
3, 2001. NJNG refused to recognize McGowan’s nomination
of Donna as the new contingent beneficiary and maintained
that Rosemary was still the beneficiary under the Plan.
On February 25, 2002, McGowan filed an appeal with
the Plan, which was denied by the Plan Claims
4
Administration Committee on April 30, 2002. McGowan
subsequently exhausted all administrative appeals and
commenced the present action with a two-count Complaint in
the United States District Court for the District of New Jersey
on March 5, 2003. In Count I, McGowan sought a declaration
directing NJNG to recognize Rosemary’s waiver and the
subsequent nomination of Donna as the new beneficiary. In
Count II, McGowan sought the imposition of civil penalties
against NJNG for allegedly failing to produce Plan documents
within the time period designated by ERISA at 29 U.S.C. §
1132(c).
In its July 26, 2004, Order and Opinion, the District
Court denied McGowan’s Motion for Summary Judgment and
granted NJNG’s Cross-Motion for Summary Judgment.
Appellant filed a timely Notice of Appeal with this Court on
August 23, 2004.
II. JURISDICTION AND STANDARDS OF REVIEW
NJNG’s retirement plan is an “employee welfare
benefit plan” within the meaning of ERISA, 29 U.S.C. §
1002(1). The District Court thus had federal question
jurisdiction over the instant dispute pursuant to 28 U.S.C. §
1331. See also 29 U.S.C. § 1132(a)(1)(B) (a plan participant
has the right to bring a civil action “to recover benefits due to
him under the terms of his plan, to enforce his rights under the
terms of the plan, or to clarify his rights to future benefits
under terms of the plan”). Pursuant to 28 U.S.C. § 1291, this
Court has appellate jurisdiction over the District Court’s final
5
order ruling on the parties’ cross-motions for summary
judgment.
“The standard of review in an appeal from an order
resolving cross-motions for summary judgment is plenary.”
Cantor v. Perelman, __ F.3d __, 2005 WL 1620323, *3 n.2
(3d Cir. July 12, 2005) (citing Int’l Union, United Mine
Workers of Am. v. Racho Trucking Co., 897 F.2d 1248, 1252
(3d Cir. 1990)). In reviewing the propriety of a summary
judgment ruling, we apply the same standard that the District
Court should have applied. Bucks County Dep’t of Mental
Health/Mental Retardation v. Pennsylvania, 379 F.3d 61, 65
(3d Cir. 2004). Under Fed. R. Civ. P. 56(c), summary
judgment should be granted where the “pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.” See Celotex
Corp. v. Catrett, 477 U.S. 317, 325 (1986). The material facts
of this case are not in dispute, and the issue presented is
purely legal: whether NJNG should be compelled to recognize
Rosemary’s waiver of her rights as a beneficiary under the
Plan.
With respect to McGowan’s claim that NJNG failed to
provide Plan documents in a timely manner, we review the
District Court’s denial of civil penalties under 29 U.S.C. §
1132(c) for abuse of discretion. See Bruch v. Firestone Tire
& Rubber Co., 828 F.2d 134, 153 (3d Cir. 1987), rev’d in part
on other grounds, 489 U.S. 101 (1989).
6
III. DISCUSSION
A. Waiver of Benefits Under ERISA
As noted, there is a circuit split on the issue of whether
administrators of an ERISA plan are required to recognize a
beneficiary’s waiver of his or her benefits. The majority of
circuits that have addressed this issue have held that such
waivers are valid under certain circumstances. See, e.g.,
Altobelli v. Int’l Bus. Mach. Corp., 77 F.3d 78 (4th Cir.
1996); Mohamed v. Kerr, 53 F.3d 911 (8th Cir. 1995);
Brandon v. Travelers Ins. Co., 18 F.3d 1321 (5th Cir. 1994);
Metro. Life Ins. Co. v. Hanslip, 939 F.2d 904 (10th Cir.
1991); Fox Valley & Vicinity Constr. Workers Pension Fund
v. Brown, 897 F.2d 275 (7th Cir. 1990) (en banc). Only two
courts of appeals have disagreed, holding that plan
administrators need not look beyond the documents on file
with the plan to determine whether there has been a valid
waiver effectuated in outside private documents. Krishna v.
Colgate Palmolive Co., 7 F.3d 11 (2d Cir. 1993); McMillan v.
Parrott, 913 F.2d 310 (6th Cir. 1990).2
2
Although this is an issue of first impression in this Court,
the District Court’s decision in this case is the fourth time that
a district court within this Circuit has addressed waivers under
ERISA. Including decision below, two district court decisions
in this Circuit have sided with the minority view, see also
Zienowicz v. Metro. Life. Ins. Co., 205 F. Supp. 2d 339 (D.N.J.
2002), and two others have applied the majority approach, John
Hancock Mut. Life Ins. Co. v. Timbo, 67 F. Supp. 2d 4137
“ERISA is an intricate, comprehensive statute.” Boggs
v. Boggs, 520 U.S. 833, 841 (1997). It is so designed in order
to protect “the interests of participants in employee benefit
plans and their beneficiaries[.]” 29 U.S.C. § 1001(b); Shaw v.
Delta Air Lines, Inc., 463 U.S. 85, 90 (1983). The majority
approach is largely based on the premise that, despite the
comprehensive nature of the statute, there are “gaps” that may
be filled by reliance on federal common law. See, e.g.,
Altobelli, 77 F.3d at 80; Brandon, 18 F.3d at 1325; Fox
Valley, 897 F.2d at 278; Lyman Lumber Co. v. Hill, 877 F.2d
692, 693 (8th Cir. 1989); see also Heasley v. Belden & Blake
Corp., 2 F.3d 1249, 1257 n.8 (3d Cir. 1993) (“Firestone
authorizes the federal courts to develop federal common law
to fill gaps left by ERISA.” (citing Firestone Tire and Rubber
Co. v. Bruch, 489 U.S. 101, 110 (1989))).
According to the majority approach, because ERISA
does not explicitly address “waiver” by a beneficiary, we may
turn to federal common law to determine whether, and under
what circumstances, an individual may validly waive her
benefits in an ERISA plan. See Altobelli, 77 F.3d at 81;
Brandon, 18 F.3d at 1326; Fox Valley, 897 F.2d at 281;
Lyman Lumber, 877 F.2d at 693. Under the federal common
law that has developed, an individual’s waiver is valid if,
“upon reading the language in the divorce decree, a
reasonable person would have understood that she was
waiving her beneficiary interest. . . .” Clift v. Clift, 210 F.3d
(D.N.J. 1999); Trustees of Iron Workers Local 451 Annuity
Fund v. O’Brien, 937 F. Supp. 346 (D. De. 1996).
8
268, 271-72 (5th Cir. 2000); see also Mohamed, 53 F.3d at
914-15 (“a property settlement agreement entered into
pursuant to a dissolution may divest former spouses of
beneficiary rights in each other’s [ERISA benefits], if the
agreement makes it clear that the former spouses so intend.”).
Moreover, “any waiver must be voluntarily made in good
faith.” Clift, 210 F.3d at 272.
We disagree with McGowan’s argument that the
situation presented by this case is not resolved by looking to
the express terms of ERISA, and we therefore decline to
follow the federal common law approach.
1. ERISA’s Requirement that Plans Be
Administered in Accordance with the
Plan Documents
ERISA imposes a fiduciary duty on plan administrators
to discharge their duties “in accordance with the documents
and instruments governing the plan. . . .” 29 U.S.C. §
1104(a)(1)(D). As such, the statute dictates that it is the
documents on file with the Plan, and not outside private
agreements between beneficiaries and participants, that
determine the rights of the parties. McMillan, 913 F.2d at
311-12 (“This clear statutory command, together with the plan
provisions, answer the question; the documents control. . . .”);
cf. Egelhoff v. Egelhoff, 532 U.S. 141, 150 (2001) (noting
“ERISA’s requirements that plans be administered, and
benefits be paid, in accordance with plan documents.”).
9
The Plan documents in this case designate Rosemary
as the beneficiary, and any requirement imposed on Plan
administrators to look beyond these documents would go
against the specific command of § 1104(a)(1)(D). Because
this case is resolved by reference to the terms of ERISA and
the Plan documents alone, federal common law should simply
have no place in our analysis.
Our holding is not only required by the terms of §
1104(a)(1)(D), but it is also necessary to promote one of the
principal goals underlying ERISA – ensuring that “plans be
uniform in their interpretation and simple in their
application.” McMillan, 913 F.2d at 312 (citing H.R. Rep.
No. 93-533 (1974), reprinted in 1974 U.S.C.C.A.N. 4639,
4650); see also Krishna, 7 F.3d at 16 (noting the “strong
interest in uniform, uncomplicated administration of ERISA
plans.”). This extremely important policy goal is best served
by the conclusion that, under § 1104(a)(1)(D), outside waivers
are not binding on Plan administrators. Cf. Fox Valley, 897
F.2d at 284 (Ripple, J., dissenting) (noting that §
1104(a)(1)(D) “embodies a strong federal policy that all
parties – participant, trustee, and beneficiary – be able to
ascertain their rights and liabilities with certainty.”). As
Judge Wilkinson stated in his dissenting opinion in Altobelli:
10
Strict adherence to § 1104(a)(1)(D) ensures that
all interested parties, including participants,
beneficiaries, and plan administrators, can
identify their rights and duties with certainty, a
primary objective of ERISA. This in turn limits
costly disputes over the effect of outside
documents on the distribution of plan benefits.
Altobelli, 77 F.3d at 82 (Wilkinson, C.J., dissenting) (internal
citations omitted).
The Supreme Court similarly relied on the need for
certainty and uniformity in the administration of ERISA plans
when it held in Egelhoff, 532 U.S. at 148-51, that ERISA
preempts a state statute whereby a former spouse’s
beneficiary designation was automatically revoked upon
divorce. The Court also relied on “the congressional goal of
‘minimiz[ing] the administrative and financial burden[s]’ on
plan administrators. . . .” Id. at 150 (quoting Ingersoll-Rand
Co. v. McClendon, 498 U.S. 133, 142 (1990)). The Court
noted that, if ERISA did not preempt the state law at issue, a
burden would be created for administrators to “familiarize
themselves with state statutes so that they can determine
whether the named beneficiary’s status has been ‘revoked’ by
operation of law” rather than “simply . . . identifying the
beneficiary specified by the plan documents.” Id. at 148-49.
These same concerns counsel against requiring administrators
to familiarize themselves with the various private agreements
that might exist between participants and beneficiaries to
determine whether they contain valid waivers under federal
common law.
11
My colleagues accept McGowan’s assertion that
requiring Plan administrators to recognize waivers does not in
fact undermine certainty or uniformity, and that it would not
create any administrative burden that is not already imposed
by ERISA itself. McGowan points to 29 U.S.C. § 1056(d)(3),
which allows the designation of an alternate payee by
obtaining a qualified domestic relations order (“QDRO”).3
Administrators are already required to review domestic
relations orders, such as divorce decrees and property
settlement agreements,4 to determine whether they are
3
All parties agree that the Florida state judgment of
dissolution, which incorporated McGowan’s Marital Settlement
Agreement and Rosemary’s waiver, does not qualify as a
QDRO.
4
ERISA defines a “domestic relations order” as:
[A]ny judgment, decree, or order (including
approval of property settlement agreement) which
–
(I) relates to the provision of child support,
alimony payments, or marital property rights to a
spouse, former spouse, child, or other dependent
of a participant, and
(II) is made pursuant to a State domestic
relations law (including a community property
law).
29 U.S.C. § 1056(d)(3)(B)(ii).
12
“qualified” under the requirements set forth in 29 U.S.C. §§
1056(d)(3)(C) & (D). Thus, McGowan claims that the
enforcement of waivers would place no burden on
administrators that does not already exist. Cf. Altobelli, 77
F.3d at 81; Fox Valley, 897 F.2d at 282 (“No such additional
burdens will be imposed. . . . Our decision only requires plan
administrators to continue their current practice of thoroughly
investigating the marital status of a participant.”).
I disagree. Sections 1056(d)(3)(C) & (D) provide very
specific, objective elements that must be present for a
domestic relations order to be “qualified.” Thus, to determine
if a document is a QDRO, administrators can essentially
utilize a checklist and easily ascertain whether, for example,
the document “specifies the name and the last known mailing
address (if any) of the participant and the name and mailing
address of each alternate payee covered by the order,” 29
U.S.C. § 1056(d)(3)(C)(i). Under the majority approach, on
the other hand, administrators have to interpret documents
that could otherwise be summarily discarded as non-QDROs,
applying less concrete standards, to determine whether they
were (1) voluntarily entered into, (2) in good faith, and (3)
specific enough that a “reasonable person” would see them as
valid waivers. It cannot be denied that requiring
administrators to review contractual language under an
amorphous “reasonable person” standard will create a risk of
litigation and administrative burdens beyond what is created
by requiring them to review orders under the uncomplicated
set of objective elements set forth in § 1056(d)(3).
13
Nevertheless, McGowan argues that there is no data
suggesting that plans in jurisdictions that enforce waivers
have actually experienced greater administrative burdens. On
the contrary, we need look no further than Eighth Circuit
precedent for evidence that the majority approach creates the
prospect of extensive litigation that is not created under the
QDRO provision. Since that court’s ruling in Lyman Lumber,
it has been faced with multiple cases involving the issue of
whether particular divorce settlement agreements contained
sufficiently specific language to constitute valid waivers
under the federal common law. See, e.g., Hill v. AT&T
Corp., 125 F.3d 646, 649-50 (8th Cir. 1997); Nat’l Auto.
Dealers & Assoc. Ret. Trust, 89 F.3d 496, 501 (8th Cir.
1996); Mohamed, 53 F.3d at 915. The fact that the Eighth
Circuit has repeatedly re-visited this issue belies the notion
that ERISA’s goals of certainty, simplicity and uniformity can
be achieved through the establishment of a uniform federal
common law.
In sum, the express terms of ERISA, as well as the
policies underlying the Act, require us to affirm the District
Court. “Rules requiring payment to named beneficiaries yield
simple administration, avoid double liability, and ensure that
beneficiaries get what’s coming quickly, without the folderol
essential under less-certain rules.” Fox Valley, 897 F.2d at
283 (Easterbrook, J., dissenting). We recognize that our
holding produces the somewhat strange result whereby
Rosemary continues to enjoy the benefits of McGowan’s
survivor annuity, even after purportedly signing away her
rights under the Plan. However, Congress has carefully laid
out the requirements for designating (and changing)
14
beneficiaries under ERISA plans and has specifically required
benefits to be paid in accordance with plan documents. As
such, our holding “is a decision already made by legislation.”
Id. at 284.
2. ERISA’s Prohibition on the Alienation or
Assignment of Benefits
Recognition of Rosemary’s waiver in this case would
also contravene ERISA’s anti-alienation provision, 29 U.S.C.
§ 1056(d)(1).5 McGowan argues that “waiver” is a distinct
concept from “assignment” or “alienation” and that waiver is
therefore not expressly prohibited by § 1056(d)(1). Cf.
Altobelli, 77 F.3d at 81; Brandon, 18 F.3d at 1324; Fox
5
Section 1056(d)(1) reads, in relevant part, “Each pension
plan shall provide that benefits provided under the plan may not
be assigned or alienated.” The Plan in this case states, in turn:
No benefit payable under the Plan shall be subject
in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or
charge, and any such action shall be void and of
no effect; nor shall any such benefit be in any
manner liable for or subject to the debts,
contracts, liabilities, engagements or torts of the
person entitled to such benefit, except as
specifically provided in the Plan.
(App. at A133.)
15
Valley, 897 F.2d at 279. We agree as a general matter that
“waiver” is not the same thing as assignment or alienation.
Assignment or alienation involves an affirmative transfer of
benefits to another person, whereas waiver usually involves
only a refusal of benefits on the part of the individual slated to
receive them. Cf. Fox Valley, 897 F.2d at 279.
That said, McGowan’s argument on this point is
similar to an argument rejected by the Supreme Court in
Boggs. In that case, the Supreme Court reversed the Fifth
Circuit’s ruling that ERISA did not preempt a state law
allowing a beneficiary to transfer her interests in her former
spouse’s pension plan by testamentary instrument. The court
of appeals had addressed whether the testamentary transfer
was prohibited by § 1056(d)(1) and attempted to distinguish
that transfer from an “assignment or alienation”:
[Section 1056(d)(1)] was not intended to affect
support obligations among the members of a
family. Furthermore, a non-participant spouse’s
ownership of an interest in the participant
spouse’s retirement benefits involves neither an
alienation nor an assignment. Under community
property law, ownership vests immediately in
the non-earning spouse, and no transaction is
needed to convey ownership. Thus, no
16
transaction prohibited by the ERISA spendthrift
provision has occurred.
Boggs v. Boggs, 82 F.3d 90, 97 (5th Cir. 1996), rev’d, 520
U.S. 833.
The Supreme Court disagreed, stating that the
testamentary transfer at issue was indeed prohibited under §
1056(d)(1), as it fell within the regulatory definition of
“assignment or alienation.” Boggs, 520 U.S. at 851 (quoting
26 C.F.R. § 1.401(a)-13(c)(1)(ii)). The regulation defines
“assignment or alienation” as “[a]ny direct or indirect
arrangement . . . whereby a party acquires from a participant
or beneficiary a right or interest enforceable against the plan
in, or to, all or any part of a plan benefit payment which is, or
may become, payable to the participant or beneficiary.” 26
C.F.R. § 1.401(a)-13(c)(1)(ii) (emphasis added). Boggs thus
demonstrates that actions which may be semantically
distinguishable from “assignment or alienation” may
nevertheless be prohibited by § 1056(d)(1).
Similarly, although the common definitions of
“waiver” and “assignment” may diverge, McGowan seeks to
use the concept of waiver in order to effectuate what is the
functional equivalent of an assignment of benefits from his
former wife to his current wife.6 As Judge Easterbrook
6
McGowan is actually asking this Court to enforce two
successive assignments – the first being the consent form that
Rosemary signed in 1998 allowing Shirley, his first wife, to be
17
pointed out in his dissenting opinion in Fox Valley, a
“waiver” in the ERISA context is not merely a refusal of
benefits, but also functions as “an anticipatory gift, to
whoever is next in line under the [Plan’s] rules[.]” 897 F.2d
at 282-83 (Easterbrook, J., dissenting). Rosemary’s “waiver”
here, if recognized, creates an “indirect arrangement”
whereby the Plan benefits are transferred to Donna, who in
turn gains an “interest enforceable against the plan.” These
actions therefore fit within the definition of “assignment or
alienation” provided in 26 C.F.R. § 1.401(a)-13(c)(1)(ii).
Thus, even though ERISA does not expressly state that
“waivers” are prohibited, recognition of the waiver sought in
this case would undermine § 1056(d)(1).
Finally, it is worth noting that any concern for the
ability of individuals to freely and voluntarily relinquish
certain rights in their former spouses’ ERISA plan benefits
upon divorce has already been addressed by Congress through
the passage of the QDRO provision in 1984. The Supreme
Court in Boggs emphasized the care with which Congress
created the QDRO mechanism in order “to give enhanced
protection to the spouse and dependent children in the event
of divorce or separation[.]” Boggs, 520 U.S. at 847. The
Court also made clear that the QDRO exception to §
1056(d)(1) is to be narrowly construed and is “not subject to
judicial expansion.” Id. at 851. As such, recognition of
additional methods of dispersing ERISA benefits in the event
named as beneficiary, and the second being his present action
seeking to replace Shirley with Donna, his current wife.
18
of a divorce would be inconsistent with this comprehensive
scheme.
The surviving spouse annuity and QDRO
provisions, which acknowledge and protect
specific pension plan community property
interests, give rise to the strong implication that
other community property claims are not
consistent with the statutory scheme. ERISA’s
silence with respect to the right of a
nonparticipant spouse to control pension plan
benefits by testamentary transfer provides
powerful support for the conclusion that the
right does not exist.
Id. at 847-48 (emphasis added) (citing Mass. Mut. Life Ins.
Co. v. Russell, 473 U.S. 134, 147-48 (1985)).
Applying this reasoning to the case at hand, ERISA’s
silence with respect to the right to waive benefits supports the
conclusion that such a right does not exist. The
comprehensive nature of the QDRO provision suggests that
Congress provided only one option to individuals in
McGowan’s position. In other words, the QDRO provision,
which recognizes the right to designate alternate payees under
certain circumstances, “give[s] rise to the strong implication
that” the designation of alternate payees under other
circumstances (i.e. through waivers) is “not consistent with
the statutory scheme,” Id.19
In sum, McGowan was required to satisfy the very
specific requirements of § 1056(d)(3) in order to change
beneficiaries, and he has provided no reason why he could not
have obtained a QDRO from the Florida state courts
effectuating Rosemary’s intent to be removed as the
beneficiary under the Plan at the time of the divorce. He
should not now be able to circumvent the requirements of §
1056(d)(3), as well as the requirements of § 1104(a)(1)(D), by
couching this change of beneficiaries in “waiver” terms.
B. Civil Penalties Under 29 U.S.C. § 1132(c)
Count II of McGowan’s Complaint alleged that NJNG
violated ERISA by failing to furnish requested Plan
documents within 30 days of his initial request and sought
civil penalties under 29 U.S.C. § 1132(c). NJNG concedes
that McGowan’s attorney made an initial request for copies of
relevant Plan documents on June 19, 2002. NJNG also
concedes that the company failed to comply with this request
until October 28, 2002 (five days after McGowan’s attorney
made a second request). NJNG argues, however, that they
were acting under a good faith (but mistaken) belief that the
June 19 th letter did not put them on notice of McGowan’s
request for documents.
Section 1132(c) grants the District Court broad
discretion in deciding whether to impose civil penalties for
delayed discovery. Bruch, 828 F.2d at 153. This Court has
held that a district court “would be well within its discretion
in setting damages at $0” if, for example, “the employee’s
claim for benefits is not colorable, and if the employer
20
displayed no bad faith in responding to the claim. . . .” Id.Here, the District Court based its decision to set damages at
zero on the determination that NJNG did not act in bad faith.
Even though the District Court held that the June 19 th letter,
when objectively viewed, was a valid request under § 1132(c),
the court determined that NJNG was under a subjective good
faith belief that they did not yet have to furnish the requested
documents. Nothing has been presented to this Court which
would cause us to question the District Court’s conclusion
that the NJNG did not act in bad faith. We therefore find no
abuse of discretion on the part of the District Court in this
case.
IV. CONCLUSION
For the foregoing reasons, we will affirm the July 26,
2004, Order and Opinion of the District Court denying
McGowan’s Motion for Summary Judgment and granting
summary judgment in favor of NJNG.
McGowan v. NJR Service Corporation; New Jersey Natural
Gas Company, No. 04-3620
BECKER, Circuit Judge, concurring.
I agree with the result reached in Part III.A of Judge
Van Antwerpen’s opinion, which holds that we should
embrace the “minority rule,” thus rendering ineffective
Rosemary’s purported waiver of her rights as beneficiary and
21
McGowan’s subsequent nomination of his present wife,
Donna, as the new beneficiary. I also agree with Judge Van
Antwerpen’s disposition, in Part III.B, of the civil penalties
issue. As the foregoing suggests, I join in the judgment
affirming the District Court.
Judge Van Antwerpen relies on three theories to
support his conclusion that Rosemary’s waiver is ineffective.
First, he reasons that, because the Plan documents in this case
designate Rosemary as the beneficiary, any requirement
imposed on Plan administrators to look beyond these
documents would violate the specific command of 29 U.S.C.
§ 1104(a)(1)(D). Second, and relatedly, he argues that this
holding is necessary to promote one of the principal goals
underlying ERISA—ensuring that “plans be uniform in their
interpretation and simple in their application.” McMillan v.
Pratt, 913 F.2d 310, 312 (6th Cir. 1990). Third, he points out
that recognition of Rosemary’s waiver in this case would
contravene ERISA’s prohibition of assignment or alienation
of benefits under 29 U.S.C. § 1056(d)(1). I write separately
to explain why I disagree with the first and second
justifications, and thus do not join Part III.A.1. I agree with
the third justification, and thus join Part III.A.2. However,
since Judge Van Antwerpen’s discussion of that point is brief,
I think it useful to expand upon it, and begin with that issue.
I.
The anti-alienation or spendthrift provision, 29 U.S.C.
§ 1056(d), provides:
22
Assignment or alienation of plan benefits
(1) Each pension plan shall provide that benefits
provided under the plan may not be assigned or
alienated.
As Judge Van Antwerpen notes, “assignment” or “alienation”
is defined by regulation to include:
Any direct or indirect arrangement (whether
revocable or irrevocable) whereby a party
acquires from a participant or beneficiary a right
or interest enforceable against the plan in, or to,
all or any part of a plan benefit payment which
is, or may become, payable to the participant or
beneficiary.
26 C.F.R. 1.401(a)-13(c)(1)(ii).7 Under this definition, I think
that the purported waiver in this case was clearly a prohibited
assignment or alienation. Rosemary’s waiver was more than a
renunciation of her right to benefits under the plan; rather, it
was an attempt to transfer her interest in the plan to
McGowan, with the expectation that he would then be
permitted to assign that interest to someone else, as he in fact
attempted to do on two separate occasions. I see nothing in
the anti-alienation provision that excepts transfers from plan
7
Neither party has challenged the validity of this definition,
and the Supreme Court’s reliance on it in Boggs v. Boggs, 520
U.S. 833, 851 (1997), suggests that we owe it deference.
23
beneficiaries to plan participants, particularly when the plan
participant then seeks to transfer that interest to a third party.
The purported waiver in this case fits squarely within the
definition of assignment or alienation as an “indirect
arrangement . . . whereby a party acquires from a participant
or beneficiary a right or interest enforceable against the plan.”
In this context, it is also useful to reference the QDRO
provisions, for they shed additional light upon the subject.
Congress added the QDRO provisions at the same time it
required plans to offer benefits in the form of qualified joint
and survivor annuities. See Retirement Equity Act of 1984,
Pub. L. No. 98-397, 98 Stat. 1426 (1984). I believe that
Congress saw QDROs as the only means by which a
participant or beneficiary could assign or alienate his or her
interest in the plan.8 This is confirmed by the language from
8
While I join in Part III.A.2 of the majority opinion, believing
that Judge Van Antwerpen correctly interprets the Supreme
Court’s discussion of the QDRO provision in Boggs v. Boggs,
520 U.S. 833 (1997), I feel constrained to note that the Supreme
Court's congressional silence jurisprudence is somewhat of a
patchwork. To be sure, a number of cases use silence as
evidence of legislative intent, see, e.g., Morrison-Knudsen
Construction Co. v. Director, Office of Workers’ Compensation
Programs, 461 U.S. 624, 632-33 (1983); Johnson v.
Transportation Agency, 480 U.S. 616, 629 n.7 (1987).
However, Justice Scalia dissented in Johnson, delivering a
critique of the majority’s discussion of silence. First, Justice
Scalia argued that the assumption that Congress’s failure to
24
the 1984 Senate Report noting that, absent a QDRO, the
participant’s first spouse is still entitled to benefits upon the
participant’s death.9 Since the waiver at issue in this case was
amend a statute demonstrates that a prior judicial interpretation
of the statute is correct should be abandoned because “[i]t is
based. . .on the patently false premise that the correctness of
statutory construction is to be measured by what the current
Congress desires, rather than by what the law as enacted meant.”
Id. at 671 (Scalia, J., dissenting). Justice Scalia also argued that
it is impossible to determine whether congressional silence
demonstrates “(1) approval of the status quo, as opposed to (2)
inability to agree upon how to alter the status quo, (3)
unawareness of the status quo, (4) indifference to the status quo,
or even (5) political cowardice.” Id. at 672.
Moreover, a number of cases have rejected silence as
evidence of legislative intent. See e.g. Fogerty v. Fantasy, Inc.
510 U.S. 517, 527-33 (1994); Borough of Ridgefield v. New
York Susquehanna & Western Railroad, 810 F.2d 57, 60 (3d Cir.
1987).
9
The Report stated:
The bill provides that a qualified joint and
survivor annuity is not required to be provided by
a plan unless the participant and spouse have been
married throughout the one-year period ending on
the earlier of (1) the participant’s annuity starting
date (the first day of the first period for which an
amount is received as an annuity (whether by
25
not a QDRO, it is prohibited by ERISA’s anti-alienation
clause.
Nevertheless, some courts have concluded that the
anti-alienation clause was intended solely to prevent the
participant from alienating his or her benefits and should not
act to prevent a secondary beneficiary from alienating his or
her rights. For instance, Judge Harlington Wood, Jr.,
speaking for the full Court of Appeals for the Seventh Circuit,
stated:
reason of retirement or disability)), or (2) the date
of the participant’s death. If a participant dies
after the annuity starting date, the spouse to
whom the participant was married during the
one-year period ending on the annuity starting
date is entitled to the survivor annuity under the
plan whether or not the participant and spouse
are married on the date of the participant’s death.
The rule does not apply, however, if a qualified
domestic relations orders . . . otherwise provides
for the division for payment of the participant’s
retirement benefits. For example, a qualified
domestic relations order could provide that the
former spouse is not entitled to any survivor
benefits under the plan.
S. Rep. No. 98-575, reprinted in 1984 U.S.C.C.A.N. 2547,
2561-62 (emphasis added).
26
The spendthrift provisions of ERISA are
designed to “ensure that the employee’s accrued
benefits are actually available for retirement
purposes,” by preventing unwise assignment or
alienation. These provisions focus on the
assignment or alienation of benefits by a
participant, not the waiver of a right to payment
of benefits made by a designated beneficiary.
Fox Valley & Vicinity Constr. Workers Pension Fund v.
Brown, 897 F.2d 275, 279 (7th Cir. 1990) (en banc) (citation
omitted); see also Estate of Altobelli v. International Business
Machines Corp., 77 F.3d 78, 81 (4th Cir. 1996) (“We agree
with the Seventh Circuit that the anti-alienation clause does
not apply to a beneficiary’s waiver.”).
This approach is not without appeal. It does seem
untoward that McGowan should not be able to have his
pension awarded to his present wife, rather than to a woman
from whom he is long divorced. The anti-alienation clause,
however, does not distinguish between benefits provided to
participants and those provided to secondary beneficiaries;
rather, it simply states that “benefits provided under the plan
may not be assigned or alienated.” 29 U.S.C. § 1056(d)(1).
Additionally, while the legislative history supports the view
that the purpose of the clause was to prohibit a spendthrift
from unwisely selling his or her interests in a plan, there is no
reason why this focus of this concern should be limited to
plan participants. If, hypothetically, McGowan were still
married to Rosemary, but she wanted to sell her rights under
the plan, I believe that most courts would find such a sale to
27
be prohibited. This view finds support in Judge Easterbrook’s
dissenting opinion in Fox Valley:
Although the majority holds that this rule
applies only to “participants” in a pension plan
as 29 U.S.C. § 1002(7) defines that term, it is
not so limited. Section 1056(d)(1) bars the
assignment of “benefits”—that is, payments
under the plan—without regard to the identity
of the person making that assignment. Section
1056(d)(2) reinforces this in saying that “a loan
made to a participant or beneficiary shall not be
treated as an assignment or alienation”, an
exemption unnecessary if the anti-alienation
clause does not apply to beneficiaries in the first
place. So Laurine could not have transferred the
money to Dessie in exchange for a sofa—at
least, Dessie could not have enforced the
promise by attaching the benefits as they came
in. Why, then, should Laurine be allowed to
transfer the money to Dessie without getting a
sofa?
897 F. 2d at 283 (Easterbrook, J., dissenting).
In view of the foregoing, I do not see how the fact that
McGowan and Rosemary are divorced changes this analysis.
Since the waiver in this case occurred in the context of a
divorce settlement, it would not be unreasonable to assume
that Rosemary received something—perhaps not a sofa, but
probably a greater share of some other portion of McGowan’s
28
assets—in return for her agreement to waive her interest in
McGowan’s pension plan. While Congress may have only
intended to bar the “unwise” alienation of benefits, the plain
language of the anti-alienation clause prohibits us from
inquiring into the wisdom of a beneficiary’s decision to
transfer her interest to someone else.
Finally, as Judge Van Antwerpen correctly notes, this
interpretation finds further support in Boggs. In that case, the
Court held that the anti-alienation clause preempted a state
law permitting a testamentary transfer by a plan beneficiary.
See 520 U.S. at 851. At the very least, Boggs stands for the
proposition that the anti-alienation clause applies equally to
beneficiaries and participants, and thus it implicitly rejects the
reasoning relied on by the Seventh Circuit in Fox Valley.
For all these reasons, I agree with Judge Van
Antwerpen that the anti-alienation clause prohibits
Rosemary’s waiver.
II.
A.
Most courts adopting the minority rule have not relied
on ERISA’s anti-alienation clause; rather, like Judge Van
Antwerpen, they have looked to 29 U.S.C. § 1104(a)(1). That
section provides:
29
. . . [A] fiduciary shall discharge his duties with
respect to a plan solely in the interest of the
participants and beneficiaries and—
....
(D) in accordance with the
documents and instruments
governing the plan insofar as such
documents and instruments are
consistent with the provisions of
this subchapter and subchapter III
of this chapter.
Judge Van Antwerpen concludes that this provision “dictates
that it is the documents on file with the Plan, and not outside
private agreements between beneficiaries and participants,
that determine the rights of the parties.” See Maj. Op. at 9. I
am not persuaded that this is the case. In my view, §
1104(a)(1)(D) simply embodies the common-sense notion that
a plan administrator should not take actions that are
inconsistent with the plan’s guidelines. Nothing in the
language prohibits the administrator from consulting other
documents, insofar as those documents do not conflict with
the language of the plan. Indeed, an administrator must
consult other documents to determine whether a participant
has obtained a valid QDRO.
In this regard, it is important to note that the provision
authorizing QDROs explicitly states that such orders are
exempt from ERISA’s anti-alienation clause but says nothing
30
whatsoever about § 1104(a)(1)(D). This suggests that
Congress simply did not see a conflict between the
requirement that plan administrators perform their duties “in
accordance with the documents and instruments governing the
plan” and the requirement that they give effect to a transfer of
benefits pursuant to a QDRO, underscoring my view that the
real obstacle to the waiver in this case is the anti-alienation
clause, not § 1104(a)(1)(D).
The plan documents in this case do not explicitly
prohibit waivers of the sort Rosemary sought to execute.10
Rather, the documents mirror the statutory language regarding
the ability of a participant to waive the qualified joint and
survivor annuity provided his spouse consents and does so
prior to the date the spouse begins receiving benefits. Thus,
10
The applicable provision reads:
The Participant may exercise his right to elect an
optional form of benefit at any time during the
election period specific in paragraph (b) below;
provided, however, that such election . . . shall be
effective only if made in writing on a form
provided by the Committee for that purpose,
signed by the Participant and delivered to the
Committee during the election period. Such
election form shall provide for the Participant to
certify (i) that he revokes the automatic surviving
spouse option or (ii) that he elects to be covered
under such option . . . .
31
the Plan documents do not prohibit waivers of the sort at issue
here.
B.
Judge Van Antwerpen also argues, in accord with
many of the courts that have adopted the minority rule, that
concerns of efficiency and uniformity justify refusing to
permit a beneficiary to waive her right to benefits. I am not
persuaded by this argument. While Congress clearly intended
to promote the uniform and efficient operation of plans, I
agree with McGowan that the increased burden on the plan in
this case would be minimal, particularly in light of the fact
that plan administrators must already review external
documents to determine whether they qualify as QDROs.
Judge Van Antwerpen argues that it is inherently easier
for plan administrators to evaluate purported QDROs, because
the statutory authorization for such agreements provides
specific criteria for doing so. But I see nothing that would
prohibit us from using our authority to fashion federal
common law in this area to develop similarly clear criteria for
evaluating purported waivers.
In addition, as both parties acknowledge, plan
administrators would need to make further actuarial
calculations when a beneficiary waives her right to benefits.
But administrators already need to make such calculations in
the context of QDROs, and indeed in most cases of this genre.
These kinds of calculations are de rigeur for plan
administrators; it is the “stuff” of their work. Thus, while
32
there would be some additional burden, I do not think it is
nearly as great as Judge Van Antwerpen suggests.
III.
For the above reasons, while I do not agree with some
of the justifications offered in Judge Van Antwerpen’s
opinion, I concur in the result and in the judgment. The plain
language of ERISA prohibits waivers of the type at issue here,
so we have no choice but to affirm the decision of the District
Court.
McGowan v. NJR Service Corporation; New Jersey Natural
Gas Company, No. 04-3620
Fuentes, Circuit Judge, dissenting.
I disagree with the result reached by Judge Van
Antwerpen and Judge Becker, that, although Rosemary
knowingly and voluntarily signed a waiver of her pension
benefits, in accordance with a negotiated and court-approved
divorce settlement, the waiver is not permitted under ERISA.
The primary question here is whether Rosemary may waive her
pension benefits despite ERISA’s anti-alienation provision,
which bars alienation or assignment of pension benefits absent
a particular order not present here. This question is the subject
of a long-standing “circuit split,” the minority position of which
is adopted by my colleagues today.
-33-
Because I believe that both ERISA and the Plan are silent
on the enforceability of waivers of benefits (as waivers are
neither alienations nor assignments), and that federal common
law ought to fill this gap by respecting the time-honored
principle of state autonomy in the domestic law area, I would
allow waivers of sufficient specificity to be given effect. I
therefore respectfully dissent.11
A. ERISA’s Anti-Alienation Clause
My colleagues agree that ERISA’s anti-alienation (or
“spendthrift”) clause, 29 U.S.C. § 1056(d), bars the waiver in
this case. I, however, agree with the Courts of Appeals that
have found that the anti-alienation provision does not address
waivers. See, e.g., Estate of Altobelli v. Int’l Bus. Mach. Corp.,
77 F.3d 78, 81 (4th Cir. 1996); Fox Valley & Vicinity Constr.
Workers Pension Fund v. Brown, 897 F.2d 275, 280 (7th Cir.
1990) (en banc); cf. Metro. Life Ins. Co. v. Hanslip, 939 F.2d
904, 907 (10th Cir. 1991) (noting that an “applicable divorce
decree” may change a beneficiary designation); Lyman Lumber
Co. v. Hill, 877 F.2d 692, 693 (8th Cir. 1989) (finding that no
provision of ERISA addresses waiver).12 ERISA is a detailed
11
I join Judge Van Antwerpen’s opinion as to Part III.B.
12
I find it immaterial that the waiver here took place after
McGowan’s retirement. But see Anderson v. Marshall, 856 F.
Supp. 604, 607 (D. Kan. 1994). The Plan here does contain an
anti-revocation provision, modeled after 29 U.S.C. § 1055(c),
which bars revocation of the pension benefit involved here after
-34-
and carefully worded statute, and I am wary of expanding the
prohibitions in § 1056(d) beyond those specifically enumerated
by Congress. Cf. Great-West Life & Annuity Ins. Co. v.
Knudson, 534 U.S. 204, 209 (2002) (“[W]e have noted that
ERISA’s carefully crafted and detailed enforcement scheme
provides strong evidence that Congress did not intend to
authorize other remedies that it simply forgot to incorporate
expressly.”) (internal quotations omitted).
As my colleagues recognize, absent a Qualified Domestic
Relations Order (“QDRO”), the anti-alienation clause bars only
assignments and alienations of benefits; it makes no reference
to waivers. An “alienation” is a “[c]onveyance or transfer of
property to another.” Black’s Law Dictionary 73 (7th ed. 1999)
(emphases added). “Assignment” is defined as “the transfer of
rights or property.” Id. at 115 (emphasis added); see also id.
(“‘An assignment is a transfer or setting over of property, or of
some right or interest therein, from one person to
another . . . .’”) (quoting Alexander M. Burrill, A Treatise on the
Law and Practice of Voluntary Assignments for the Benefit of
Creditors § 1, at 1 (James Avery Webb 6th ed. 1894)). In
contrast, “waiver” is defined as “[t]he voluntary relinquishment
or abandonment–express or implied–of a legal right or
advantage.” Id. at 1574. Waiver does not involve a transfer of
retirement. However, a revocation (with consent) of one’s
election to a benefit is materially different from a waiver of
benefits by a vested beneficiary, as the language of § 1055(c)
appears to be a limitation only on the participant’s actions,
rather than on the beneficiary’s actions.
-35-
rights; it is merely a relinquishment. Congress understands this
distinction between a waiver and an assignment, see 5 U.S.C.
§ 8465,13 and chose only to prohibit the latter (along with
alienations) in the anti-alienation provision of ERISA.
I find the distinction between waiver and assignment or
alienation to be a significant one. The anti-alienation provision
serves specific purposes. It prevents spouses who have been
given rights and benefits under a plan from unwisely
squandering those rights. For example, it safeguards against
unscrupulous predators preying upon participants and
beneficiaries by offering inadequate immediate gratification in
13
Section 8465, which governs the Federal Employees’
Retirement System and is entitled “Waiver, allotment, and
assignment of benefits,” reads:
(a) An individual entitled to an annuity payable
from the Fund may decline to accept all or any
part of the amount of the annuity by a waiver
signed and filed with the Office. The waiver may
be revoked in writing at any time. Payment of the
annuity waived may not be made for the period
during which the waiver is in effect.
(b) An individual entitled to an annuity payable
from the Fund may make allotments or
assignments of amounts from the annuity for such
purposes as the Office considers appropriate.
§ 8465 (emphases added).
-36-
exchange for the long-term benefits ERISA is designed to
guarantee. See Coar v. Kazimir, 990 F.2d 1413, 1420 (3d Cir.
1993)14 (noting that the legislative history of the anti-alienation
provision suggests that it was “intended to protect plan
beneficiaries by ensuring that plan assets are used only for
payment of benefits”) (internal quotation omitted). These
concerns are not nearly as strong with respect to waiver, as
waiver is not likely to be induced by an offer from an
unscrupulous, predatory character. Only the participant would
derive benefits from a waiver (as one cannot waive rights to a
third party), whereas anyone could pay a beneficiary for an
assignment or alienation. Another concern animating the anti-
alienation provision is creditor’s access to benefits, which is
notably absent here. 15 See Coar, 990 F.2d at 1420-21 (noting
that “we do not believe that Congress intended the
14
Similar to the set-off in Coar, the waiver here is
conceptually distinct from assignment and alienation.
Accordingly, our comment that “inasmuch as a set-off is not an
alienation, then the absence of an exception allowing a set-off
to the restraint on alienation is meaningless” applies with equal
force here. Coar, 990 F.2d at 1424.
15
We also noted in Coar that the legislative history of the
provision speaks of “a garnishment or levy” and that the there
are remarks in the history that term it an “anti-garnishment
provision.” 990 F.2d at 1420-21. Congress’s concern regarding
this sort of involuntary alienation further underscores my belief
that it was not targeting knowing and voluntary waivers when
drafting the provision.
-37-
anti-alienation provision to dilute the potential relief available
to pension beneficiaries. Instead, we read section 206(d)(1) and,
by extension [Guidry v. Sheet Metal Workers National Pension
Fund, 493 U.S. 365 (1990)], as shielding only the beneficiaries’
interest under the pension plan from third-party creditors.”).
Both of my colleagues find much import in 26 C.F.R.
§ 1.401(a)-13(c)(1)(ii), a regulation promulgated by the Internal
Revenue Service concerning the anti-alienation provision. The
regulation interprets the statute as covering “[a]ny direct or
indirect arrangement (whether revocable or irrevocable)
whereby a party acquires from a participant or beneficiary a
right or interest enforceable against the plan.” Id. As noted by
my colleagues, allowing McGowan’s subsequent and
independent attempt to nominate Donna appears to transform
Rosemary’s waiver into an indirect assignment, as described by
26 C.F.R. § 1.401(a)-13(c)(1)(ii). However, such a reading
allows third-party actions to invalidate what would otherwise be
valid waivers. Indeed, the majority would appear to prohibit all
waivers, even though in many cases, there will be no
“renomination” at issue. The majority’s argument also puts the
cart before the horse, inasmuch as it presupposes that the Plan
must give effect to McGowan’s renomination of Donna. Were
the combination of the waiver and the nomination to create a
prohibited indirect assignment, only the latter action should be
invalidated, as it is that action that creates the problematic
arrangement.16 Conceiving of the waiver as an acquisition of
16
Although I would have remanded the question whether the
renomination of Donna for the annuity option should be given
-38-
rights by McGowan himself is also untenable, as he would not
get rights to the benefit involved here (a survivor annuity) if the
waiver is given effect. Instead, the right to the annuity would be
destroyed by the waiver.
In Boggs v. Boggs, the Supreme Court “consider[ed]
whether [ERISA] pre-empts a state law allowing a
nonparticipant spouse to transfer by testamentary instrument an
interest in undistributed pension plan benefits.” 520 U.S. 833,
835-36 (1997). The Court addressed whether state community
property law was preempted by ERISA, and the Court rejected
the argument that ERISA simply did not speak to the issue. It
found that it could “begin, and in this case end, the analysis by
simply asking if state law conflicts with the provisions of
ERISA or operates to frustrate its objects” and held “that there
is a conflict, which suffices to resolve the case.” Id. at 841. All
of the cases considering Boggs’s effect on waivers of the sort
considered here recognize that ERISA broadly preempts state
effect, I note that there are good reasons not to honor it. If no
renomination is allowed, waiver could only occur once, so there
would be no danger of repeated divorces causing high
administrative costs based on the need to do several actuarial
recalculations. However, this is not to say that Donna would be
without protection, as the waiver would likely result in the
lump-sum death benefit under Section 6.2 of the Plan (as
opposed to the survivor annuity under Option B of Section 8.2)
going into effect, as the annuity option would then not be
effective. Indeed, McGowan could change beneficiaries for the
lump-sum benefit freely under Section 6.3.
-39-
law, and go on to find that the federal common law approach is
not in conflict with the holding of Boggs. See, e.g., Manning v.
Hayes, 212 F.3d 866, 873 (5th Cir. 2000) (holding that Boggs
does not cast doubt on Brandon v. Travelers Ins. Co., 18 F.3d
1321 (5th Cir. 1994)); Metro. Life Ins. Co. v. Pettit, 164 F.3d
857, 864 (4th Cir. 1998) (reaffirming Altobelli after Boggs).
Importantly, when discussing the surviving spouse annuity
(which is the benefit here), the Boggs Court noted that the wife
“has not waived her right to the survivor’s annuity.” 520 U.S.
at 842. Also, the Court, noted that the “anti-alienation provision
can ‘be seen to bespeak a pension law protective policy of
special intensity: Retirement funds shall remain inviolate until
retirement.’” Id. at 851 (quoting J. Langbein & B. Wolk,
Pension and Employee Benefit Law 547 (2d ed. 1995)). Here,
Rosemary’s waiver occurred after McGowan’s retirement.
However, some of the language in Boggs may cast doubt
on the policies behind the majority rule. The Court stated that
the “principal object [of ERISA] is to protect plan participants
and beneficiaries.” Id. at 845 (emphasis added). This language
seems to conflict with the language in the Fox Valley majority
opinion discussing how the QDRO provision is meant to protect
participants, not beneficiaries. Compare id. at 847 (“In creating
the QDRO mechanism Congress was careful to provide that the
alternate payee, the ‘spouse, former spouse, child, or other
dependent of a participant,’ is to be considered a plan
beneficiary.”) (quoting §§ 1056(d)(3)(K) & (J)), with Fox
Valley, 897 F.2d at 279 (noting that the anti-alienation provision
“focus[es] on the assignment or alienation of benefits by a
participant, not the waiver of a right to payment of benefits
made by a designated beneficiary”). Similarly, the Court noted
-40-
that “[t]he QDRO provisions protect those persons who, often
as a result of divorce, might not receive the benefits they
otherwise would have had available during their retirement as a
means of income.” Id. at 854; see also id. at 853 (“Even a plan
participant cannot defeat a nonparticipant surviving spouse’s
statutory entitlement to an annuity.”). I agree with my
colleagues that Boggs makes clear that the anti-alienation clause
provides a restraint on actions by both participants and
beneficiaries. However, that does not change my view that the
provision does not speak to waivers.
Given the silence of the anti-alienation provision on the
issue of waiver, I find it inapplicable here. I agree with Judge
Becker, for the reasons he states, that the fiduciary duty
provision of ERISA, 29 U.S.C. § 1104(a)(1)(D), is of no import
here.17 Because the QDRO exception applies only to
17
I note also that Judge Van Antwerpen’s opinion reads this
provision as allowing all documents filed with the Plan to
govern its administration, including forms filed to designate
beneficiaries. However, although I need not resolve this issue
because this case is ultimately decided only on the anti-
alienation provision, I note in passing that the governing
documents could reasonably be limited to those that set forth the
terms of the plan. Cf. McElroy v. SmithKline Beecham Health
& Welfare Benefits Trust Plan for U.S. Employees, 340 F.3d
139, 143-44 (3d Cir. 2003) (“Clearly, the ‘documents and
instruments governing the plan’ do not necessarily include all
relevant documents and, in particular, do not necessarily include
the plaintiff’s claim file.”).
-41-
assignments and alienations, it is also irrelevant to this case. See
Fox Valley, 897 F.2d at 279 (“The QDRO requirements specify
the procedures necessary to assign benefits, but those procedures
need not be followed when a nonparticipant is waiving an
interest in pension benefits. ERISA allows beneficiaries to
waive their interests in benefits.”).
In accord with the majority of the courts of appeals that
have faced the issue, given the comprehensive nature of ERISA,
its broad preemptive scope, and its goal of uniformity in the law
of employee benefit plans, I believe that ERISA’s silence on
waiver should be filled by federal common law. See McGurl v.
Trucking Employees of North Jersey Welfare Fund, Inc., 124
F.3d 471, 481 (3d Cir. 1997) (“‘[W]here state law is preempted
and no specific federal provision governs, a court is forced to
make law or leave a void where neither state nor federal law
applies. In such a situation it is a reasonable inference that
Congress intended some law, and therefore federal law, to
apply.’”) (quoting Wayne Chem., Inc. v. Columbus Agency
Serv. Corp., 426 F. Supp. 316, 322 (N.D. Ill. 1977)); see also
Heasley v. Belden & Blake Corp., 2 F.3d 1249, 1257 n.8 (3d
Cir. 1993) (“[Firestone Tire & Rubber Co. v. Bruch, 489 U.S.
101, 110 (1989)] authorizes the federal courts to develop federal
common law to fill gaps left by ERISA.”).
B. Federal Common Law
My conclusion that federal common law should fill the
gap in ERISA concerning the enforceability of waivers does not
end the inquiry, as it must be determined whether, and in what
instances, federal common law should recognize waivers.
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Allowing waiver fulfills the intent of the parties to a divorce,
allows spouses broader room to negotiate during the settlement
of property attendant to divorce, and comports with
longstanding common law domestic relations rules. The Fox
Valley majority reasoned that, because ERISA does not prohibit
or preempt a waiver and because enforcement will not create an
undue burden for plan administrators, a proper waiver should be
given effect. 897 F.2d at 279-80; see also Altobelli, 77 F.3d at
81-82.
I agree with Judge Becker that the enforcement of
waivers would not lead to disuniformity and complexity in the
administration of ERISA plans. The Fox Valley court also
disagreed with the suggestion that its “decision imposes
burdensome obligations on plan administrators,” stating that
“[n]o such additional burdens will be imposed because, under
the ERISA statutory scheme, a plan administrator must
investigate the marital history of a participant and determine
whether any domestic relations orders exist that could affect the
distribution of benefits.” 879 F.2d at 282. The Fifth Circuit has
also discussed the “long and venerable history” of “[f]ederal
respect for state domestic relations law” in support of the federal
common law approach. Brandon, 18 F.3d at 1326 (quoting De
Sylva v. Ballentine, 351 U.S. 570, 580 (1956) (citations
omitted)). I find the reasoning of the Fox Valley and Brandon
courts to be compelling.
Although I find that federal policy favors giving effect to
waivers, it is still unclear whether federal common law should
(1) allow waivers to be given effect if the plan provisions do not
specifically prohibit it or (2) mandate that waivers be given
effect notwithstanding any plan provisions to the contrary.
Although the former option may be more in line with
§ 1104(a)(1)(D) (the fiduciary duty provision), the better option
is the latter, which promotes uniformity and certainty in plan
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administration. However, given that the Plan here is silent on
waiver, this case does not mandate resolution of this issue, as
Rosemary’s waiver should be given effect under either
approach.
Although in some cases there may be a dispute over
whether particular language in a divorce settlement is specific
and definite enough to constitute waiver of a pension benefit,
there is no serious dispute here as to whether Rosemary’s waiver
was insufficient. It clearly identified the Plan and waives all
rights to benefits under the Plan. Accordingly, I would give
effect to Rosemary’s waiver.
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