Opinion
No. 92-3333.
November 17, 1993. Rehearing Denied January 6, 1994.
Appeal from the Circuit Court, Duval County, Aaron K. Bowden, J.
Edward A. White, Jacksonville, for appellant.
Mitchel E. Woodlief of Woodlief Rush, P.A., Jacksonville, for appellee.
Appellant appeals a final judgment awarding insurance proceeds to appellee. Because we conclude that the underlying action herein is preempted by the provisions of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., we reverse.
Decedent, David Reineke, and appellee were married in 1958. They obtained a final judgment of dissolution of marriage on December 30, 1981. That judgment included the finding that "the wife is entitled to be maintained on the present insurance policies of the husband as sole beneficiary for so long as he shall be obligated to make any payments to the wife pursuant to the terms of this final judgment." In contradiction to this finding, the same final judgment of dissolution orders that "[t]he husband shall carry the wife as the sole beneficiary of all life insurance policies presently in effect upon his life including his group coverage with his employer Crowley Maritime so long as he shall be required to pay her any benefits under the term of his policy."
At the time the dissolution judgment was entered, decedent was employed with Crowley Maritime Corporation and insured under its basic group life insurance in the sum of $50,000.00, issued by Bankers Life Insurance Company. Following entry of the judgment, decedent maintained appellee as the designated beneficiary. Under the terms of this policy, coverage was to terminate on the last day of active employment. Thereafter, in 1982, Crowley Maritime obtained for certain executive employees, including decedent, separate life insurance coverage in the additional sum of $50,000.00, issued by Mutual Benefit Life Insurance Company. This policy is part of an employee benefit plan federally qualified under ERISA. The policy provides "[i]f you are married, your spouse will automatically be your beneficiary. However, you may waive that designation and name someone else with your spouse's signed and notarized consent."
In 1983, decedent married Vicki Reineke, designating her as beneficiary on this new executive policy, retaining appellee as beneficiary on the basic policy. Decedent subsequently divorced Vicki and, in 1986, married appellant, designating her as beneficiary on the executive policy. At no time did appellant or decedent make efforts to waive the automatic spousal beneficiary designation on this policy. Decedent's health began to decline and he notified Crowley Maritime that he wished to retire early. Decedent's subsequent retirement on December 30, 1988, resulted in an automatic termination of the basic policy. Decedent died at age sixty-two on May 28, 1991, with only the executive policy still in effect. Until his death, decedent continued paying alimony to appellee pursuant to the dissolution judgment.
On June 5, 1991, appellant submitted a claim to Mutual Benefit for proceeds. When Mutual Benefit refused to pay same, the instant action ensued. At an early point in the action below, Mutual Benefit was granted leave to interplead the insurance proceeds and appellee was joined as intervenor. Following a trial, the lower court determined that the intent of the final dissolution judgment was that decedent maintain a $50,000.00 life insurance policy for the benefit of appellee so long as decedent was obligated to make alimony payments to her. The lower court concluded that this requirement divested decedent of any ownership rights in the policy and that, notwithstanding the fact that the executive policy did not exist at the time of the dissolution judgment, appellee was not divested of her equitable interest obtained through the dissolution judgment. Lastly, the lower court concluded that the provisions of ERISA were not preemptive.
The parties herein do not dispute that the executive life policy was an employee benefit plan governed by ERISA. In order to comply with ERISA, an employee pension benefit plan must contain, among other things, a prohibition against assignment or alienation of benefits. 29 U.S.C. § 1056(d)(1). Pursuant to 29 U.S.C. § 1144(a), this "spendthrift" provision generally will preempt any state laws permitting assignment or alienation of benefits. 29 U.S.C. § 1144(a), the ERISA preemption clause, provides in pertinent part: "[T]he provisions of this subchapter . . . shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. . . ." A state claim "relates to" an employee benefit plan "if it has a connection with or reference to such plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). "State law" includes "all laws, decisions, rules, regulations, or other State action having the effect of law, of any State." 29 U.S.C. § 1144(c).
Federal law governing the treatment of employee pension benefit plans in state domestic relations was changed in 1984 with the enactment of the Retirement Equity Act (REA). REA amended ERISA by creating a limited exception to the prohibition of assignment or alienation of qualified plan benefits when a qualified domestic relations order (QDRO) is issued pursuant to state domestic relations law. 29 U.S.C. § 1144(b)(7). 29 U.S.C. § 1056 (d)(3)(B)(i) provides that an order relating to spousal property rights is a QDRO if it "creates or recognizes the existence of an alternate payee's right to . . . receive all or a portion of the benefits payable with respect to a participant under the plan." Certain factual information must be specified in the order including (1) the name and last known mailing address (if any) of the participant and each alternate payee; (2) the amount or percentage of the participant's benefits to be paid by the plan to an alternate payee (or the manner in which the amount or percentage is to be determined); (3) the number of payments or the period for which the payments are required; and (4) the specific name of each plan to which the order applies. In addition, the order must provide for non-alternation of benefits in that the order will not be qualified if it (1) requires a plan to provide a type or form of benefit, or any option, not otherwise available under the plan; (2) requires the plan to provide increased benefits (determined on the basis of actuarial value); or (3) requires benefits to be paid to an alternate payee if such benefits are already committed to be paid to another alternate payee under a preexisting QDRO. 29 U.S.C. § 1056 (d)(3)(B)(C) (D). Substantial compliance with these mechanical requirements may suffice. See S.Rep. No. 575, 98th Cong.2d Sess.; 20 (1984), reprinted in 1984 U.S.C.C.A.N. 2547, 2566; Stinner v. Stinner, 520 Pa. 374, 554 A.2d 45 (1989).
In the case sub judice, in determining that the judgment of dissolution met the aforementioned requirements, hence precluding the preemptive effect of ERISA, the lower court apparently overlooked or misapplied the applicable date of REA. The effective date of REA for QDRO purposes is January 1, 1985. Pub.Law 98-397 § 303(d), reprinted at 1984 U.S.C.C.A.N. 1426, 1453. In the case of a domestic relations order entered before such date, the plan administrator:
(1) shall treat such order as a qualified domestic relations order if such administrator is paying benefits pursuant to such order on such date, and
(2) may treat any other such order entered before such date as a qualified domestic relations order even if such order does not meet the requirements of such amendments.
"Administrator" is defined in section 1002(16)(A) as:
(i) the person specifically so designated by the terms of the instrument under which the plan is operated;
(ii) if an administrator is not so designated, the plan sponsor; or
(iii) in the case of a plan for which an administrator is not designated and a plan sponsor cannot be identified, such other person as the Secretary may by regulation prescribe.
Herein, the final judgment of dissolution was entered on December 30, 1981. We find no support in the record for the applicability of either of the above two limited exceptions providing for retroactive application of the amendment. Even if the dissolution judgment meets the strict requirements of a QDRO, we feel compelled to find the preemption provisions of ERISA controlling. Hence, the lower court was precluded from applying inconsistent or conflicting state law in enforcing the provisions of the dissolution judgment. The executive policy, in compliance with ERISA, contained an anti-alienation clause. Inasmuch as the record reveals no waiver of such, the appellant herein, as designated beneficiary, must prevail. We therefore REVERSE and REMAND for entry of a final judgment awarding appellant the proceeds of the executive policy.
SMITH, J., specially concurs with opinion.
WOLF, J., specially concurs with opinion.
In my view, the claims of appellee Mary Reineke must fail based upon the express language of the 1981 final dissolution judgment and the specific provisions of the existing Bankers Life policy, the only insurance policy that could possibly be affected by the final judgment of 1981. As noted by Judge Mickle in his opinion, the final judgment ordered David Reineke to maintain the "present insurance policies," or the "insurance policies presently in effect" on his life. Only the Bankers Life policy was a "present" insurance policy, or a policy "presently in effect," within the terms of the final judgment. This policy, as Judge Mickle has also noted, contained a provision for its automatic termination on the last day of David Reineke's employment with Crowley Maritime. Just as the rights of David Reineke under the Bankers Life policy were limited by this provision, so also were the rights of Mary Reineke. Her status as beneficiary terminated with the automatic termination of the policy, as did her entitlement to insurance protection under the final judgment of dissolution. Since this is not a case in which the Mutual Benefit policy was obtained by or issued to the insured in substitution for the Bankers Life policy, nor obtained by the insured to comply with the judgment, there is no basis for application of equitable principles that would allow Mary Reineke's claim to be transferred to the Mutual Benefit policy. See, Harris v. Byard, 501 So.2d 730 (Fla. 1st DCA 1987).
Further, since Mary Reineke has no valid claims under the Mutual Benefit policy for the reasons expressed by Judge Mickle, we have no alternative but to reverse the trial court's ruling.
The majority opinion holds that no order entered prior to January 1, 1985, may be considered a qualified domestic relations order (QDRO) pursuant to the Employer Retirement Income Security Act (ERISA), even if it substantially complies with the present statutory criteria for QDRO. The opinion states that for any order entered prior to January 1, 1985, to be enforceable and not in conflict with ERISA, it must comply with statutory exemptions from ERISA. It is my belief that the statutory exemption requirements must only be resorted to if the order does not substantially comply with the statutory criteria for a QDRO. Any other interpretation is inconsistent with the purposes of ERISA and is unsupported by a substantial portion of existing case law. The order in question substantially complies with the requirements of ERISA and, thus, constitutes a QDRO which may be enforced notwithstanding ERISA. I do agree, however, with Judge Smith that the designation of the beneficiary in the life insurance policy in question was not affected by the final judgment of 1981. I, therefore, concur in reversing the decision of the trial court.
For orders entered prior to January 1, 1985, to be exempt from ERISA, (1) benefits must begin being paid prior to January 1, 1985, or (2) the plan administrator must choose to treat the order as QDRO.
The purposes of ERISA and its relationship with qualified domestic relations orders were explained in the case of In re Marriage of Norfleet, 243 Ill. App.3d 925, 928-29, 184 Ill.Dec. 63, 65, 612 N.E.2d 939, 941 (Ill. App. 4th Dist. 1993):
ERISA contains a spendthrift provision providing that "benefits provided under the [retirement] plan may not be assigned or alienated." ( 29 U.S.C. § 1056 (d)(1) (1988).) However, State court domestic relation orders were considered in some cases as proper exceptions to the limitations of the "may not be assigned or alienated" provision. United Association of Journeymen Apprentices of the Plumbing Pipefitting Industry of the United States and Canada Local 198 AFL-CIO Pension Plan v. Myers (M.D.La. 1980), 488 F. Supp. 704; Operating Engineers Local No. 428 Pension Trust Fund v. Zamborsky (D.Ariz. 1979), 470 F. Supp. 1174, aff'd (9th Cir. 1981), 650 F.2d 196; Savings Profit Sharing Fund of Sears Employees v. Gago (7th Cir. 1983), 717 F.2d 1038.
The congressional policy underlying the spendthrift provision of ERISA was to "`safeguard a stream of income for pensioners (and their dependents . . .), even if that decision prevents others from securing relief for the wrongs done them.'" ( Ablamis v. Roper (9th Cir. 1991), 937 F.2d 1450, 1454, quoting Guidry v. Sheet Metal Workers National Pension Fund (1990), 493 U.S. 365, 376, 110 S.Ct. 680, 687, 107 L.Ed.2d 782, 795). The 1984 REA was, in part, enacted to afford better protection for women dependent upon their husbands' earnings, by requiring pension plans to provide automatic survivor benefits. See 29 U.S.C. § 1055 (1988); Ablamis, 937 F.2d at 1453.
Congress recognized that the policy reasons for protections provided to the present spouse against claims of third parties were not equally applicable to valid claims by former spouses pursuant to a court order:
The purpose of the proscription on alienation and assignment is to protect an employee from his own financial improvidence in dealing with third parties. The provision is not intended to alter traditional support obligations but rather to assume that the employee and his beneficiaries reap the ultimate benefits due upon retirement.Stackhouse v. Russell, 447 N.W.2d 124, 125 (Iowa 1989), citing A.T. T. v. Merry, 592 F.2d 118, 124 (2d Cir. 1979).
Rather than exempt all domestic relations orders, however, Congress wished to protect plan administrators from undue administrative burdens and, thus, required that state court orders provide the necessary information to determine the identity and interest of the court-ordered beneficiary. Carland v. Metropolitan Life Insurance Co., 935 F.2d 1114, 1119 (10th Cir. 1991), cert. denied, Metropolitan Life Ins. Co. v. Carland, ___ U.S. ___, 112 S.Ct. 670, 116 L.Ed.2d 761 (1991).
According to section 1056(d), a court order relating to spousal property rights is a QDRO if it "creates or recognizes the existence of an alternate payee's right to . . . receive all or a portion of the benefits payable" under a plan. Id. § 1056(d)(3)(B)(i)(I). To qualify under the statute, a court order must include: (1) the name of the participant and the name and mailing address of an alternate payee covered by the court order, (2) the amount or percentage of benefits payable to an alternate payee or a manner of determining the amount or percentage, (3) the number of payments or period affected by the order, and (4) the plan to which the order applies. Id. § 1056(d)(3)(B)(i)(II), (d)(3)(C). The statute also includes three general prohibitions for a QDRO. The order may not require a plan to provide: (1) any type of benefit or option not provided under the plan, (2) increased benefits, or (3) payment of benefits to an alternate payee required to be paid to another alternate payee under a previous QDRO. Id. § 1056(d)(3)(B)(i)(II), (d)(3)(D).
The trial court found that the order in this case was a QDRO. Upon review, I cannot disagree with the determination that the order in question substantially complied with ERISA. The order provides sufficient notice to the plan administrator as well as constituting a valid support obligation from a previous marriage. Under these circumstances, an order entered prior to 1984 would be enforceable without determining whether it was exempt pursuant to the statute. Stinner v. Stinner, 520 Pa. 374, 554 A.2d 45 (Pa. 1989), cert. denied, 492 U.S. 919, 109 S.Ct. 3245, 106 L.Ed.2d 591 (1989); Carland, supra. In fact, a number of courts have held that domestic relations orders issued prior to 1984 were not subject to ERISA in light of the fact that the spendthrift clause of ERISA did not intend to preclude legitimate support obligations.
The North Carolina Court of Appeals recently had occasion to address this issue. See Evans v. Evans, 111 N.C. App. 792, 434 S.E.2d 856 (1993). That court noted that there was an implied exception followed by the majority of jurisdictions prior to the time Congress passed the 1984 amendment to ERISA, also known as the Retirement Equity Act, or REACT, which specifically codified an exception for certain QDROs. The court stated that "[t]he House Education and Labor Committee's intent was to remove the confusion then existing in this area and to remove ERISA as a barrier to recovery of alimony, child support and property settlements under certain conditions." Id., 434 S.E.2d at 859-60. The court in Norfleet, supra, noted state court domestic relation orders were considered in some cases as proper exceptions to the limitations of ERISA. Norfleet, 243 Ill. App.3d at 928, 184 Ill.Dec. 63, 612 N.E.2d 939. In Stone v. Stone, 450 F. Supp. 919 (N.D.Cal. 1978), affirmed, 632 F.2d 740 (9th Cir. Cal. 1980), cert. denied, 453 U.S. 922, 101 S.Ct. 3158, 69 L.Ed.2d 1004 (1981), the wife was awarded an interest in her husband's vested retirement benefits under a plan subject to ERISA when the parties divorced. The court found that ERISA did not prevent the award of an interest to the wife. The court noted that domestic relations are in the province of state law, and it did not find federal preemption because that was not the clear purpose of Congress. See also Employee Savings Plan of Mobil Oil Corp. v. Geer, 535 F. Supp. 1052 (S.D.N.Y. 1982). In Alexander v. Alexander, 784 S.W.2d 112 (Tex. App. 1990), the court found that ERISA, prior to REACT, did not preempt state court property divisions. Alexander at 113. The reasoning of these courts appears to be that since the state and federal courts have concurrent jurisdiction over the action, that even without REACT, the trial court has jurisdiction to make property divisions. See also General Dynamics Corp. v. Harris, 581 S.W.2d 300 (Tex.Civ.App. 10th Dist. 1979) (wife's claim based on divorce decree not preempted by ERISA even though regulation administration of the retirement plan fell within ERISA since state and federal courts have concurrent jurisdiction over the action pursuant to section 1132(a)(1).
I would, therefore, find that ERISA did not preempt enforcement of the domestic relations order, but reverse the decision of the trial court concerning the applicability of that order to the insurance policy in question.