Keen v. Weaver

Justice HECHT,

joined by Justice OWEN, Justice JEFFERSON, and Justice WAINWRIGHT, dissenting.

The federal Employment Retirement Income Security Act of 1974 states that an employee benefit plan is to be administered “in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with [the statute].” 1 Both pension plans in this case provided:

The Beneficiary is as designated by the [Annuitant/Participant] in the application, provided that such designation is in form and wording satisfactory to [the plan provider]....

The [Annuitant/Participant] may designate or change the Beneficiary by giv *729 ing written notice to [the plan provider] at its home office in form and wording satisfactory to [the plan provider]....

The plans make no provision for a beneficiary’s waiver of benefits. These terms are consistent with ERISA’s definition of a beneficiary as “a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.” 2 It should follow, therefore, that ERISA requires pension plans to be administered so that the beneficiary is the person designated by the participant in writing to the plan provider unless it would be inconsistent with other ERISA provisions 3 or the aims of the statute to do so. State law — a divorce decree, a statute, or any other law — that would alter this requirement is preempted, as the United States Supreme Court recently held in Egelhoff v. Egelhoff 4 and as we recognized in Barnett v. Barnett. 5 Thus, Frank Weaver’s designation of his then-wife Patsy Keen could not be changed by Texas law based on their decree of divorce, their agreement incident to divorce, or section 9.302 of the Family Code that invalidates, with certain exceptions, pre-divorce designations of beneficiaries of retirement plans. 6

*730 Instead of this construction of ERISA, which the Court admits is “simple and easy to apply,” 7 the Court opts for one that is not only more complicated and harder to apply, but one that cannot be squared with the statutory text, at least as we have been given to understand it by Egelhoff. In the face of the United States Supreme Court’s holding that ERISA preempts a state statute from altering the payment of plan benefits (with the possible exception of “slayer” statutes which prevent murderers from profiting by their crimes, consistent with the ancient equitable maxim that no one is permitted to profit from his own wrong), 8 this Court simply circumvents preemption by allowing state law to be reincarnated as federal common law. The result is the same, practically speaking, as if state law were not preempted at all. The obvious weakness in this position is that the Court is unable to supply any reason, real or imagined, why ERISA would explicitly require plans to be administered according to their terms, preempt state law to assure that end, and then reincorporate state law into federal common law so that plans are not administered according to their terms, thereby making the express statutory language simply illusory. Ignoring this fundamental flaw in its position, the Court instead offers two arguments in support.

The first is that ERISA itself contains exceptions to the rule that plans be administered according to their terms. For example, a 1984 amendment to ERISA allows a change in beneficiary to be made by a qualified domestic relations order. 9 ERISA, in other provisions added by the 1984 amendments, also allows a spouse to waive a mandated joint and survivor annuity in certain circumstances. 10 The Court appears to take the existence of these two express exceptions as an indication that there should be others. I confess the Court’s logic eludes me here. Surely the creation of a narrow exception for QDROs suggests fairly strongly: this and nothing else. It is true that the 1984 amendment allowed a plan administrator discretion to treat a divorce decree prior to the amendment’s effective date as a QDRO, 11 but this too suggests that the divorce decree cannot be given effect absent the plan administrator’s exercise of discretion. Weaver does not argue in this case that the plan administrator elected or should have elected to treat Keen’s divorce decree as a QDRO. If a plan beneficiary could be changed by any divorce decree without limitation, a statute allowing changes by divorce decrees only in specified circumstances would have no purpose. It seems plain to me that the 1984 amendment severely undercuts the Court’s position. 12 *731 The same is true of the waiver provision. If ERISA allows benefits to be waived without regard to plan terms, then a provision that also allows waivers in only some circumstances is pointless. An express recognition of certain waivers indicates that others are not permitted. The Court observes that welfare plan benefits may be garnished. 13 But garnishment is premised on the debtor’s being the beneficiary under the plan; otherwise, there is nothing to garnish. Why the Court thinks garnishment has any bearing on whether a plan beneficiary can be changed other than in accordance with the plan’s terms is not clear.

The Court’s second argument is that the Supreme Court has directed courts to look to federal common law in applying ERISA, and four federal circuits — the Fourth, 14 Fifth, 15 Seventh, 16 and Eighth 17 — have done so in determining whether a designated beneficiary has waived benefits. But the Supreme Court has allowed recourse to federal common law only in “ ‘areas where ERISA has nothing to say’ ”. 18 According to Egelhoff, ERISA has something to say about benefits payments: in the Supreme Court’s words, ERISA expressly “governs the payment of benefits, a central matter of plan administration.” 19 Of the four circuits that have used federal common law to find a waiver of benefits, only one has reiterated that view since Egelhoff, 20 and it did not consider whether Egelhoff permits a federal common law of waiver under ERISA. No circuit has retreated from its view, but the point is that the cases on which the Court relies largely have not had to consider Egelhoff. The Sixth Circuit 21 has refused to apply federal common law to find a waiver of benefits, and the Secretary of Labor has filed an amicus curiae brief in this case arguing that such use of federal common law is inconsistent with Egelhoff.

*732 The Secretary makes a compelling case. In Egelhojf, the Supreme Court stated that a state statute that requires a plan administrator to pay benefits to beneficiaries other than “those identified in the plan documents ... implicates an area of core ERISA concern”: 22

In particular, it runs counter to ERISA’s commands that a plan shall “specify the basis on which payments are made to and from the plan,” [29 U.S.C.] § 1102(b)(4), and that the fiduciary shall administer the plan “in accordance with the documents and instruments governing the plan,” [29 U.S.C.] § 1104(a)(1)(D), making payments to a “beneficiary” who is “designated by a participant, or by the terms of [the] plan.” [29 U.S.C.] § 1002(8). In other words, unlike generally applicable laws regulating “areas where ERISA has nothing to say,” [Cal. Div. of Labor Standards Enforcement v. Dillingham Construction, N.A., Inc., 519 U.S. 316, 330 , 117 S.Ct. 832 , 136 L.Ed.2d 791 (1997) ], which we have upheld notwithstanding their incidental effect on ERISA plans, see, e.g. ibid., this statute governs the payment of benefits, a central matter of plan administration. 23

Furthermore, the Supreme Court stated, “[o]ne of the principal goals of ERISA is to enable employers ‘to establish a uniform administrative scheme, which provides a set of standard procedures to guide processing of claims and disbursement of benefits.’ ” 24 While application of some federal common law does not theoretically threaten uniform plan administration in the same way fifty states’ laws would, as a practical matter uniformity is impaired by the differences in federal common law in the circuits due to the way in which it is derived-by reference to states’ laws.

While acknowledging the legitimacy of the Secretary’s concerns, the Court is unable to identify a coherent federal common law of waiver. From two cases the Court concludes that a waiver must be specific, 25 but they say nothing about a requirement that a waiver be made in good faith, an additional element the Court finds in another case. 26 Moreover, the Court concludes that a waiver must be voluntary. Thus, ERISA precludes stripping one spouse of any interest in the other’s pension plan in a contested divorce but not in an agreed divorce. It is not apparent why the result should be dependent on whether the divorce decree was agreed.

Finally, the Court’s position is at odds with our holding last year in Barnett that the federal common law does not include a remedy for fraud on a community estate. Why is there a federal common law of waiver but not of fraud? The Court offers no answer.

Frank Weaver was free to change the beneficiaries of his pension plans at any time, provided only that the designations be in writing and in a form suitable to the plan providers. He may not have removed Keen as beneficiary because he thought the divorce decree had accomplished that, or he may have decided to leave her as beneficiary notwithstanding the divorce decree, or he may not have thought about *733 the matter at all. Rather than put plan administrators to the task of attempting to resolve these virtually inevitable uncertainties about deceased participants’ intentions, ERISA provides a general rule that is “simple and easy to apply” for participants, beneficiaries, and plan administrators alike: look to the beneficiary designation, except in very specific cases.

For these reasons, I would hold, as urged by the Secretary of Labor, that the pension plan benefits in this case be paid to the beneficiary designated in accordance with the terms of the plan.

. 29 U.S.C. § 1104 (a)(1)(D); Egelhoff v. Egelhoff, 532 U.S. 141 , 151 n. 4, 121 S.Ct. 1322 , 149 L.Ed.2d 264 (2001) (quoting statute).

. 29 U.S.C. § 1002 (8); see also Egelhoff, 532 U.S. at 147 , 121 S.Ct. 1322 (quoting statute).

. See, e.g., 29 U.S.C. § 1055 (c) (not applicable here, under the effective dates and transitional rules provided in secs. 302 and 303 of the Retirement Equity Act (REA) of 1984, Pub.L. No. 98-397, 98 Stat. 1426 (1984) (codified as a historical note to 29 U.S.C. § 1001 (1985))).

. 532 U.S. 141 , 121 S.Ct. 1322 , 149 L.Ed.2d 264 (2001).

. 67 S.W.3d 107 (Tex.2001).

. Tex. Fam.Code § 9.302 ("Pre-Decree Designation of Ex-Spouse as Beneficiary in Retirement Benefits and Other Financial Plans”):

"(a) If a decree of divorce or annulment is rendered after a spouse, acting in the capacity of a participant, annuitant, or account holder, has designated the other spouse as a beneficiary under an individual retirement account, employee stock option plan, stock option, or other form of savings, bonus, profit-sharing, or other employer plan or financial plan of an employee or a participant in force at the time of rendition, the designating provision in the plan in favor of the other former spouse is not effective unless:

(1) the decree designates the other former spouse as the beneficiary;

(2) the designating former spouse redes-ignates the other former spouse as the beneficiary after rendition of the decree; or

(3) the other former spouse is designated to receive the proceeds or benefits in trust for, on behalf of, or for the benefit of a child or dependent of either former spouse.

"(b) If a designation is not effective under Subsection (a), the benefits or proceeds are payable to the named alternative beneficiary or, if there is not a named alternative beneficiary, to the designating former spouse.

"(c) A business entity, employer, pension trust, insurer, financial institution, or other person obligated to pay retirement benefits or proceeds of a financial plan covered by this section who pays the benefits or proceeds to the beneficiary under a designation of the other former spouse that is not effective under Subsection (a) is liable for payment of the benefits or proceeds to the person provided by Subsection (b) only if:

(1) before payment of the benefits or proceeds to the designated beneficiary, the pay- or receives written notice at the home office or principal office of the payor from an interested person that the designation of the beneficiary or fiduciary is not effective under Subsection (a); and

(2) the payor has not interpleaded the benefits or proceeds into the registry of a court of competent jurisdiction in accordance with the Texas Rules of Civil Procedure.

"(d) This section does not affect the right of a former spouse to assert an ownership interest in an undivided pension, retirement, annuity, or other financial plan described by this section as provided by this subchapter.

"(e) This section does not apply to the disposition of a beneficial interest in a retirement benefit or other financial plan of a public retirement system as defined by Section 802.001, Government Code.”

. Ante at 724.

. Egelhoff, 532 U.S. at 150, 152 , 121 S.Ct. 1322 .

. 29 U.S.C. § 1056 (d)(3)(A), enacted in REA of 1984, Pub.L. No. 98-397, sec. 104 (a), 98 Stat. 1426 , 1433.

. Id. § 1055(c)(1)(A), (g), and (k); REA of 1984, Pub.L. No. 98-397, sec. 103 (a), 98 Stat. 1426 , 1430.

. See Dial v. NFL Player Supplemental Disability Plan, 174 F.3d 606 (5th Cir.1999) (noting that a court reviews a plan administrator's statutory and legal conclusions de novo).

. See Boggs v. Boggs, 520 U.S. 833, 850 , 117 S.Ct. 1754 , 138 L.Ed.2d 45 (1997) (reviewing cases including In re Marriage of Campa, 89 Cal.App.3d 113 , 152 Cal.Rptr. 362 (1979), dismissed for want of a substantial federal question, 444 U.S. 1028 , 100 S.Ct. 696 , 62 L.Ed.2d 664 (1980), and concluding that: "[w]hether or not this [pre-REA federal common-law] extension of the definition of 'beneficiary' was consistent with the statute then in force, these authorities are not applicable in light of the REA amendments. The QDRO and the surviving spouse annuity provisions define the scope of a nonparticipant spouse’s community property interests in pension plans consistent with ERISA.”).

. Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 841 , 108 S.Ct. 2182 , 100 L.Ed.2d 836 (1988).

. Estate of Altobelli v. Int'l Bus. Mach. Corp., 77 F.3d 78 (4th Cir.1996).

. Clift v. Clift, 210 F.3d 268 , 269-272 (5th Cir.2000) (addressing a divorce decree waiving “[a]ny and all policies of life insurance” and citing Brandon v. Travelers Ins. Co., 18 F.3d 1321 (5th Cir.1994)).

. Fox Valley & Vicinity Constr. Workers Pension Fund v. Brown, 897 F.2d 275 (7th Cir. 1990) (en banc), cert. denied, 498 U.S. 820 , 111 S.Ct. 67 , 112 L.Ed.2d 41 (1990), distinguished in Melton v. Melton, 324 F.3d 941 , 946 (7th Cir.2003) (no waiver under a divorce agreement that, although it contained a blanket revocation of the parties’ "interests in all financial and property rights arising 'by reason of their marital relation' and in 'any asset assigned to a party by this Agreement’ ... including ‘annuities, life insurance policies,’ and other kinds of financial instruments”, did not expressly identify husband’s ERISA-regu-lated employee group term life insurance or mention employment-related benefits).

. Lyman Lumber Co. v. Hill, 877 F.2d 692, 693-694 (8th Cir.1989) (divorce decree stating that plan participant " 'shall have as his own, free of any interest of [ex-wife], his interest in the profit-sharing plan of his employer’ ” did not divest ex-wife of her beneficiary interest in the plan; the decree gave the participant his entire interest in the plan free of any interest of ex-wife, but did not specifically refer to or modify ex-wife's beneficiary interest).

. Egelhoff, 532 U.S. at 148 , 121 S.Ct. 1322 (quoting Cal. Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 330 , 117 S.Ct. 832 , 136 L.Ed.2d 791 (1997)).

. Egelhoff, 532 U.S. at 148 , 121 S.Ct. 1322 .

. Melton v. Melton, 324 F.3d 941 , 945 (7th Cir.2003).

. Metropolitan Life Ins. Co. v. Pressley, 82 F.3d 126 (6th Cir.1996); McMillan v. Parrott, 913 F.2d 310 (6th Cir.1990).

. Egelhoff, 532 U.S. at 142 , 121 S.Ct. 1322 .

. 532 U.S. at 147-148 , 121 S.Ct. 1322 .

. 532 U.S. at 148 , 121 S.Ct. 1322 (quoting Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 9 , 107 S.Ct. 2211 , 96 L.Ed.2d 1 (1987)).

. Fox Valley & Vicinity Constr. Workers Pension Fund v. Brown, 897 F.2d 275, 281 (7th Cir.1990) (en banc), cert. denied, 498 U.S. 820 , 111 S.Ct. 67 , 112 L.Ed.2d 41 (1990); Lyman Lumber Co. v. Hill, 877 F.2d 692, 693 (8th Cir.1989).

. Brandon v. Travelers Ins. Co., 18 F.3d 1321, 1326 (5th Cir.1994).