"v" 

Protecting 

PBGC America's Pensions 

Pension Benefit Guaranty Corporation 

1200 K Street, N.W., Washington, D.C. 20005-4026 

November 24, 2010 

Re: Appeal 201 0-c::::::::J, I 

'-----------' ~ and Appeal 2010-1 H 

PBGC Case 203971; Huffy Corp. Retirement Plan (the "Plan" or the "Huffy 

Plan") 

r; 

Dear Mr. Jeffery: 

The Appeals Board has reviewed the appeals your law firm filed on behalf of your clients 

01 I and I fl r.! Th~ ~ app~als relate to the August 3,2003 

"Qualified Domestic Reiations Order" obt~ined from the District Court in the 216th Judicial 

District in Kerr County, Texas (the "DRO," which is Enclosure 1 to this decision). PBGC, in a \ 

letter dated December 18, 2009 (Enclosure 2), determined that the DRO is not a Qualified 

Domestic Relations Order ("QDRO"). For the reasons explained below, the Appeals Board has 

upheld PBGC's December 18, 2009 determination and therefore is denying the I I 

appeals. 

Factual Background 

c::=J I Iretired from the Huffy Corporation ("Huffy") and started receiving a 

Plan benefit on August 1, 1994. 0 benefit is in the form of a Joint and 100% survivor annuity 

("J&100%SA") with D then~, I fl 1·2 c:=::p. elected the J&100%SA on the 

Plan's form, "Application for Retirement Benefits under Huffy Salaried Employees' Retirement 

Plan," which is signed by him and dated May 11, 1994 (Enclosure 3).3, 

1 Although you filed a single appeal letter dated May 6, 2010 on behalf of both ~ an~ ~, 

the Appeals Board docketed a separate appeal for each individual. In this decision, we use the term "the 

I I appeals" when we refer (collectively) to 1 I and 1 I appeals. The Appeals 

Board has concluded that the I I appeals arise out of the same or·similar facts and seek the same or similar 

relief. Exercising its discretion under section 4003.56 of PBGC's regulation, the Board has consolidated the two 

appeals and is responding to them in a single decision. See 29 Code of~ederal Regulations section 4003.56. 

2 F or convenience, in this decision we will refer to 0 I ~ I II I and C=::J I 

by their first names, i.e., "0" "1 ~" and "C=::J." '------- '----~---" '---------" '--------" 

3 Althoug~ , la did not sign this forrn[Jr signature was not required because the J&100%SA provides D 

with a more valuable survivor benefit thim the minimum Qualified Joint and Survivor Annuity ("QJSA") benefit, 

required by the Employee Retirement Income Security Act ("ERISA") (and also is more valuable than the Plan's 

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c=J and I I were divorced by a court order signed on March 15,2002 (the "Divorce 

Order"). The Divorce Order awarded c:=Jall rights "related to any ... pension plan ... existing 

by reason of the I I's past, present, or future employment.,,4 . 

In a letter dated December 5, 2002 (Enclosure 4), c=J asked the Plan's Retirement 

Committee "to revoke my designated beneficiary, namely I II I, since we are no 

longer I I and C." Huffy, on behalf of the Plan, then asked its legal counsel whether the 

division of the benefits provided under the Divorce Order is proper under ERISA and the 

Internal Revenue Code ("IRC"). 

~--------~----~ 

I I of the law firm of Dinsmore & Shohl LLP responded to Huffy's 

request in a January 15, 2003 letter (the 'I I Letter," provided as EnClosure 5). After 

discussing the facts and applicable law concerning QDROs and QJSAs,5 the I I Letter stated 

as follows (with footnotes omitted): 

Treasury Regulation Section 1.401(a), Q&A 25(b)(3) provides that if the 

QJSA commences before a divorce, the spouse at the time of ' the participant's 

annl;lity starting date is entitled to the survivor annuity .. Additionally, some courts 

have held that when a retirement benefit commences in the form of QJSA prior to 

a divorce, the current spouse vests in those survivQr benefits. 

Treasury Regulation Section 1.401(a), Q&A-25(b)(3) implies that even if 

a QJSA commences before the divorce, the participant and spouse may execute a 

qualified domestic relations order disposing of the spouse's Interest in the survivor 

annuity provided that an alternate payee becomes entitled to the survivor annuity. ' 

An alternate payee cannot be anyone other than a spouse, a former spouse, a 

child, or other dependant of the participant. However, since a QDRO cannot 

provide for increased benefits, the monthly QJSA payment will still be calculated 

using the life expectancies of the participant and the participant's spouse onD 

annuity starting date, and the monthly payments will cease upon the death of the 

survivor ofl r andO former spouse. 

The I I Letter concluded: "Since the Retirement Plan does not allow a participant to change 

his or her retirement benefit option after its commencement, I I is unable to 

designate a new beneficiary for the survivor annuity portion of 0 retirement benefit under the 

Retirement Plan unless he obtains a QDRO designating fl proper alternative payee. ; .. IfC 

I I does obtain a QDRO, the retirement benefit will be calculated in the same manner, 

except that the beneficiary entitled to receive the survivor annuity will be changed." 

normal form for a married participant, which is a Joint and 50% Survivor Annuity ("J&50%SA")). See 29 U.S.c. 

§ 1055(d)(l), ERISA § 205(d)(l) (definition of QJSA); 29 U.S.C. § 1055(c)(2), ERISA § 205(c)(2) (requirements 

for QJSA waiver); and Treas. Reg. § 1.401 (a)-20 (Q&A 16) (discussion ofQJSA waiver requirements). 

4 The Divorce Order did not specify the names of 0 pension plans. 

5 The letter points out. that, as' a defmed benefit plan, the Plan is subject to the QJSA requirements under IRC 

sections 401 (a)(ll) and 417. 

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c::::::::J married I Ion February 14, 2003. We note that I I (who was born in 

1957) and 1 I (who was born in 1959) both are younger than = (who was born in 1936). 

On July 31, 2003, the Texas state court issued an Order on Motion for Clarification and 

Modification of the Final Decree of Divorce (Enclosure 6). This order provided that c=J 

I I has all interest and rights to the Huffy Corporation retirement accounts andl f 

I lis divested of all interest and rights to the Huffy Corporation retirement account 

including but not limited to the right to be designated the beneficiary of the suwivor annuity 

portion of the retirement account." 

The DRO, which was "signed and rendered" by the state court Judge on August 3, 2003, 

refers to c::::::::J as "Husband" and to I I as "Wife." In Section 2, the DRO provides: 

"I I designates I II I whomD married on February D, 2003, as the' Alternate 

Payee' with respect to the survivor annuity portion of the Retirement Benefits set forth above, 

within the meaning ofIRC 414(p)(8) and ERISA 206(d)(3)(K)." 

Section 4 of the DRO further states that the. 'c=J waived D rights to the survivor 

annuity portion of the Retirement Plan." . Additionally, in Section 5, the DRO purported to 

provide I I with this survivor benefit, stating: 

The Alternate Payee is entitled to the survivor annuity portion of the Retirement 

Plan distributed in accordance with the provisions of the Plan. The survivor. 

annuity portion of the Retirement Benefit remains unchanged and is calculated 

based upon the life expectancies of Husband and Wife. 

Shortly thereafter, the DRO was submitted to Huffy for approval as a QDRO. In a letter 

dated August 15, 2003 from I I, Corporate Benefits Manager of Huffy, to c=J (the 

"Huffy Letter," which is Enclosure 7), the DRO was approved as a QDRO. The Huffy Letter 

stated: 

Our ERISA counsel has determined that the order dated August 5, 2003 meets the 

requirements of the Internal Reve,nue Code Section 414(P) and is determined to be 

a Qualified Domestic Relations Order (QDRO) with regard to your benefits under 

the Huffy Corporation Retirement Plan. Per the terms of the QDRO,I f 

I I is now designated as the Alternate Payee with respect to the survivor 

benefits under the Plan and, upon your death, will receive $7,173.95 per month 

for D lifetime. . 

o 

PBqC became statutory trustee of the Plan in October 2005 and continued to pay c=J 

benefit on an estimated basis. In a)etter dated February 15,2006, = requested that PBGC 

review 0 benefit payment amount. 

PBGC sent c=J a benefit determination letter, on September 26, 2008. This letter 

informed CJ that 0 monthly PBGC-payable benefit is $4,317.09, which is greater than the 

estimated amount he had been receiving. The letter further stated that PBGC would pay[) 

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benefit in the fonn of a joint-and-100%-survivor annuity, which "provides you with a reduced 

monthly benefit for the rest of your life. Thereafter, your surviving beneficiary will receive 

100% of your benefit for the rest of your beneficiary's life." The benefit statement PBGC 

enclosed with the letter listed I I as the beneficiary. PBGC's September 26, 2008 

determination became' final after the 45-day appeal period expired without the filing of an 

appeal. See 29 C.P.R. §§ 4003.23, 4003.59. 

\ Prior to filing your May 6, 2010 appeal letter, you wrote two letters to PBGC onc==J 

behalf, which are dated February 16, 2009, and April 8, 2009. These letters contended that the 

DRO properly substituted I Ifor 1 las the beneficiary for the survivor annuity. You 

also specifically asked that PBGC issue you an initial detennination on the survivor benefit 

issue, so that you may have the opportunity to appeal that issue to the!Appeals Board. After 

initially denying this request, PBGC reconsidered its position and issued the December 18, 2009 

determination that is the subject ofthel ~ appeals. 

PBGC's Determination 

In its December 18, 2009 determination, PBGC stated the following two general reasons 

as to why the DRO could not be qualified: (1) the DRO violates the legal requirements for a 

QDRO because, in attempting to substitutel ~ fori ~ as the beneficiary of the survivor 

annuity, it would impose increased costs on the pension plan and/or would require the plan to 

provide a form of benefit not offered by the Plan; and (2) the DRO impermissibly attempts to 

divest I I of D right to the survivor benefit, a right that had vested at the time thatc::::J 

began to receive 0 pension benefits. The impact of PBGC's determination is that I I 

retained D right to be treated as the .beneficiary for the survivor annuity portion of I f 

benefit. 

With respect to the first of its reasons, PBGC noted that the DRO could be interpreted in 

at least two different ways.6 Under one interpretation, the DRO would provide I r with a 

survivor benefit (upon =::::J death) that is "paid toO for as long as [] lives, and not end upon 

the death ofl I" (hereinafter "Interpretation 1"). PBGC concluded that Interpretation 1 

would require the Plan "to provide increased benefits (detennined on the basis of actuarial 

value)," and thus would be contrary to the requirement 'for a QDRO in ERISA section 

206( d)(3)(ii).7 

6 In its December 18, 2009 determination letter, PBGC stated that the ambiguity that exists due to these two 

possible interpretations is another reason why the DRO cannot be qualified because it fails to "clearly specif1y] ... 

the amount or percentage of the .participant's benefits to be paid by the plan to each such alternate payee, or the 

manner in which such amount or percentage is to be determined," or "the number of payments or period to which 

such order applies." See ERISA § 206( d)(3)(C)(ii)-(iii). 

7 PBGC concluded that, ifthe DRO is interpreted to substitutec=J fori ~ as the beneficiary of the survivor 

benefit (Interpretation 1), the DRO would impose an increased cost to the Plan (on an actuarial basis) based on 

"adverse selection." PBGC's determination, at pages 3 to 5, provides a detailed explanation of the "adverse 

. selection" concept and the reasons why (in PBGC's view) adverse selection woVld cause increased costs to the Plan. 

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PBGC's letter also stated that the DRO could be interpreted as providing I f with a 

survivor benefit (in place of I I) that "would cease upon the death ofl f (even if 

I lis still alive)" (hereinafter "Interpretation 2"). PBGC concluded that Interpretation 2 

would be contrary to the QDRO requirement stated in ERISA section 206( d)(3)(ii) because it 

would require the plan to provide "a form of benefit, or [ an] option, not otherwise provided 

under the plan." . 

With respect to the second of its reasons as to why the DRO could not be qualified, 

PBGC referred to the QJSA requirements in ERISA section 205. That section, among other 

things, provides that: (1) all defined benefit plans must offer a QJSA as the automatic benefit 

form for a married participant; (2) a participant, with spousal consent, may elect a different form 

or change the beneficiary, as permitted by the plan; and (3) such a "waiver" of the QJSA is valid 

only if obtained within a specified time period before retirement. Noting that ERISA provided a 

90-day period for benefit elections at the timec:=J retired, PBGC concluded that the time period 

for c::=J and I I to waive the QJSA form of benefit "had long since lapsed" on the date the 

DRO was obtained. 

PBGC further stated that, if the QJSA is not waived during the applicable time period, 

"the spouse's right to the survivor annuity vests when the annuity begins." In making this point, 

PBGC observed that "the majority of the federal courts that have considered the issue have held 

that, because the survivor rights irrevocably vest at the annuity starting date, a subsequent 

domestic relations order cannot reassign the spouse's rights to this benefit." Based on those court 

decisions, PBGC concluded that the DRO .could not properly transfer I I I right to the 

survivor benefit to I I. 

PBGC's determination also cited the agency's written QDRO policy, which "precludes 

changing the beneficiary of a QJSA after benefits commence." Under this policy, PBGC pays 

survivor benefits to the spouse that was married to the participant at the annuity starting date, 

unless those benefits were waived by that spouse within the applicable election period, or a 

QDRO is in effect before the participant's benefit commenced. Thus, PBGC concluded that. its 

December 18, 2009 determination denying qualification of the DRO "is consistent with this 

longstanding agency policy." 

. Finally, PBGC acknowledged that the former Plan administrator had determined that the 

DRO met the requirements for a QDRO. PBGC concluded, however, that the earlier 

determination was erroneous an~ thus could not be accepted by PBGC. 

Your Appeal Letter 

Your May 6, 2010 appeal letter ("the Appeal Brief' or "AB") contends that "PBGC 

misunderstands the role ofthe QDRO in this dispute." AB at 2. You assert that the DRO "does 

not purport to divest I I of the QJSA's survivor benefits," and thus it does not mean "that 

the QJSA's survivor benefits revert to I I."!d. In making this claim, you indicate that the 

relevant facts are: (1) I f "waivedO QJSA survivor rights in the Final Decree of Divorce," 

which further is acknowledged in the DRO; and (2) "the intent pf the [DRO] was to designate an 

alternate payee - ~ 1- to receive the survivor benefits that 1 I waived." Id. 

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In contending that \the DRO should be qualified, you disagree with PBGC's conclusion 

that the DRO would require the Plan to provide increased benefits. Id. at 5-8. You assert that 

this PBGC conclusion is based on its mistaken belief that the DRO would "transfer" the QJSA, 

survivor benefit from I Ito ~ I Id. at 6. You refer to section 5 of the DRO, which' 

states that the "survivor annuity portion of the Retirement Benefit remains unchanged and is 

calculated based upon the life expectancies of Husband [I II and c::::::::J [I II." 

Id. at 7. You claim that this language confirms that I I benefits under the DRO "terminate 

on I I Ideath, not ~ r' Id. You argue that, if the DRO is interpreted in this manner, 

. there is no increased cost to the Plan. Id. \ 

The Appeal Brief also disagrees with PBGC's conclusion that the DRO would require the 

Plan to provide a benefit not otherwise available under the Plan. Id. at 8. You state thatthe Plan 

expressly provides for the designation of an alternate payee to receive QJSA.benefits, so long as 

the designation is made pursuant to a qualified domestic relations order. Id. Thus, in your view, 

"the clear intent of the Plan is to provide a QJSA benefit that pays survivor benefits to a ../ 

surviving spouse or to an appropriately designated alternate payee." !d. 

You further assert that the Plan vests the Plan Administrator "with extraordinarily broad 

discretionary powers." Id. As a result; "it is up to the Plan Administrator to determine in its 

'sole and absolute' discretion what benefits the Plan intended to provide ... " Id. You state that 

"[t]he benefits the Plan approved fori ~ represent the Plan Administrator's exercise of its 

discretionary authority" as to the benefits the Plan is permitted to pay. !d. Therefore, you 

contend that PBGC should not change the former Plan administrator qualification of the DRO on 

the basis that the DRO would require the Plan to provide a benefit not otherwise available under 

~P~.M r 

The Appeal Brief also disagrees with PBGC's determination that the DRO cannot be 

qualified because "'it attempts to divest I I of D statutory right' to the QJSA survivor 

benefit' after that right had already vested. ", Id. at 9. You state: 

The PBGC's argument fails for two reasons. As noted above, the QDRO did not 

seek to divest I I of D right to the QJSA benefits; I I waived those 

rights. In addition, the PBGC's argument that I I I rights irrevocably vested 

is based on the decision in Carmona v. Carmona, 544 F.3d 988 (9th Cir. 2008). 

The court in that case concluded, inter alia, that a beneficiary could not waive D 

interest in 0 ex-husband's survivor benefits. Id. at 1005-1006. That aspect of the 

court's holding was abrogated by the Supreme Court's decision in Kennedy v. Plan 

Admin: For DuPont Savings and Invest. Plan, 129 S.Ct. 865 (2009). There, the 

Court found that a beneficiary holding an otherwise inalienable pension benefit 

could indeed waive D right to receive those benefits. Id. at 873. Thus, because 

I I waived D right to the QJSA's survivor benefit, the Plan was free to 

honor the QDRO and designate I I as the alternate payee for those benefits. 

Accordingly, the QDRO is a qualified domestic relations order that the PBGC 

must honor. 

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Finally, you contend that PBGC's determination should be reversed for the following two 

additional reasons: (1) based on the factual circumstances under which the DRO was qualified, 

the 

I 

Plan "waived" its legal defenses with respect to its validity, and this waiver also is binding on 

PBGC; and (2) the I I "have relied to their detriment on the Plan's representations" 

with respect to validity of the DRO, and thus "PBGC, acting on behalf of the Plan, is estopped to 

deny the validity and enforceability of the QDRO." Id. at 3-5. 

Relevant Plan Provisions 

The Plan's governing documents incorporate ERISA:s requirements for QJSAs and 

QDROs.8 Section 9.05(b) of the 2001 Plan provides that the "Participant's waiver [of a QJSA] 

and D Spouse's consent thereof ... must be made within the 90 day period ending on the) 

Participant's Annuity Starting Date." Section 9.09, titled "Survivor Benefit," provides that upon 

the participant's death "the Participant's Beneficiary shall be entitled to a Survivor Benefit (if 

any) governed exclusively by the distribution form elected by the Participant, provided that the 

remaining portion of such benefit will continue to be distributed at least as rapidly as under the 

method of distribution being used prior to the Participant's death .... " 

Section 12.02 of the 2001 Plan, which contains standard ERISA language concerning the 

non-alienation of benefits and the QDRO exception to that rule, states in relevant part: . 

( 

. Except as permitted by Treasury Regulations § 1.40l(a)-13, no benefit or interest 

of a Participant or Beneficiary available under the Plan shall be subject to 

assignment or alienation, either voluntarily or involuntarily. The preceding 

sentence also applies to the creation, assignment, or recognition of a right to any 

benefit payable with respect to a Participant under a domestic rdations order, 

unless: (a) the Plan Administrator determines that the order is a qualified domestic 

relations order, as defined in Section 414(P) of the Internal Revenue Code (a 

"Qualified Domestic Relations Order"); .... The Plan shall pay benefits to an 

Alternate Payee under a Qualified Domestic Relations Order no sooner than the 

Participant's earliest retirement age as provided pursuantto Section 414(P)(4) of 

the Code. . 

Discussion 

The Plan terminated, effective August 31, 2005, without sufficient assets to provide all 

benefits PBGC guarantees under ERISA. PBGC determines the benefits it may pay in 

accordance with the terms of the pension plan, the provisions of ERISA, and PBGC regulations 

and policies. 

There are two basic types of domestic relations orders: separate interest orders and shared 

payment orders. A separate interest order generally provides the alternate payee with a portion 

8 See Huffy Corporation Retirement Plan effective January 1,2001 ("2001 Plan") at sections 2.57 (defmition of 

"Qualified Joint and Survivor Annuity"); section 2.59 (definition of "Qualified Waiver"); section 9.04 (provision 

concerning required annuity and optional forms); section 9.05 ("Qualified Waiver"); and section 9.06 ("Participant 

Notice and Election Requirements"). You provided a copy of the 2001 Plan as an enclosure to the Appeal Brief. 

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(or, in some' cases, all) of the value of the participant's benefit based on the lifetime of the 

alternate payee. The alternate payee's benefit is usually payable regardless Of whether the 

participant has entered pay ·status. Conversely, a shared payment or~er generally provides the 

alternate payee with a portion (or, in some cases, all) of the participant's pension payments 

during the participant's lifetime, or for a specified shorter period. 

Under ERISA and the IRC, the Plan Administrator determines whether an order is 

qualified. In the case of a terminated defined benefit plan for which PBGC is trustee, however, 

PBGC makes that determination. Section 6.6-3.F of PBGC's ,"Qualified Domestic Relations 

Orders" policy (the "QDRO Policy," which we are providing as Enclosure 8) describes the 

procedures PBGC will follow in reviewing domestic relations orders submitted to PBGC for 

qualification determinations. 

For an order qualified by the prior plan administrator prior to PBGC becoming trustee of 

the plan, section 6.6-3.F.2.b ofPBGC's QDRO Policy states: 

PBGC may review QDROs that a prior plan administrator qualified before PBGC 

became trustee of a plan. PBGC will not suspend payments to a participant or 

alternate payee while it is reviewing a QDRO that was qualified by the prior plan 

administrator. PBGC will not contact the parties to the QDRO unless PBGC finds 

something in the order that would not meet the requirements for a QDRO .' .. 

Generally, PBGC will not make changes to QDRO benefits that went into pay 

status prior to trusteeship. 

If PBGC determines that the prior plan administrator improperly qualified the order, PBGC will 

notify the interested parties that the order is not qualified and the reasons for the nonqualification. PBGC will then grant the interested parties a 45-day right of appeal so that they 

can provide a specific reason why PBGC's determination is wrong. 

In the remainder of this "Discussion" section,we address the following six questions: 

1. How should the DRO be interpreted? 

2. Does the DRO fail to comply with ERISA because it would require the Plan to 

provide increased benefits? ,r 

3. Should the DRO be qualified because "---I __ I "waived"D right to the survivor 

benefit in the Divorce Order? 

4. Did PBGC correctly determine that 1 1 could not validly transfer[]r survivor 

benefit interest to 1 1 through a QDRO? 

5. Must PBGC qualify I the DRO based on the legal doctrines of "waiver" and/or 

"estoppel"? 

Based on our analysis of these questions, we have decided that the ,---I ____ I appeals must be 

denied. / 

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1. How should the DRO be interpreted? 

As stated above, PBGC concluded that the DRO could be interpreted in at least two 

ways, including: (1) Interpretation 1, under which the DRO would provide I I with a 

survivor benefit upon c=J death for as long as she lives; thus, any payments tol r would 

not end upon I I I death; and (2) Interpretation 2, which would substitute I I as the J ' 

beneficiary of the survivor benefit that (absent the DRO) is payable to I I upon I ~ 

death; thus, any payments to I r would cease upon the death of I I In the Appeal 

Brief, you contend that the DRO is not ambiguous and Interpretation 2 is the correct one. 

The Appeals Board agrees with you that the DRO's terms clearly are consistent with 

Interpretation 2. The Board reached this conclusion based on the following analysis: 

• The DRO, on page 1, states thae=Jn "is receiving benefits under the Plan in the form of a 

qualified joint and survivor annuity, calculated based upon the life expectancies of c=J] and 

[I I (hereinafter the "Retirement Benefit)." Section 5 of the DRO then provides that 

I I as alternate payee, is entitled to receive "the survivor annuity portion of the 

Retirement Plan distributed in accordance with the provisions of the Plan." Thus, Section 5 

refers to the same benefit that is identified on page 1 of the DRO, which is a QJSA based on 

c=J and I I f lives. 

• Section 5 further clarifi~s that the "survivor annuity portion or the Retirement Benefit 

remains unchanged and is calculated based upon the life expectancies of c::=J] and 

[I I." There also is nothing anywhere in the DRO that would'indicate that I I 

survivor benefit could continue after I I f death. Accordingly, when the DRO is read as 

a whole, it provides I r with the same survivor benefit payments that I I otherwise 

would receive absent any QDRO. Accordingly, under the terms of the DRO, no payments 

could be made to I rafter I I ~ death. 

PBGC, in stating that the DRO's language "is far from clear," referred to the former Plan 

administrator's interpretation of the DRO in the Huffy Letter. The Huffy Letter stated: "Per the 

terms of the QDRO, I r I I is now designated as the Alternate Payee with respect to 

the survivor benefits under the Plan and, upon your death, will receive $7,173.95 per month for 

C lifetime." Enclosure 7 (emphasis added).' Thus, the Huffy Letter is consistent with 

Interpretation 1 (rather than Interpretation 2), since the words '0 lifetime" in it refer to 

I I rather than to I I Accordingly, the Appeals Board found that the above-quoted 

language in the Huffy Letter does not correctly describe the terms of the DRO. 

The Appeals Board is unable to determine why the language of the Huffy letter differs 

from the language in the DRO.9 It is unnecessary, however, to determine .the reason for the 

inconsistency because: (1) whether or not the DRO meets the requirements for a QDRO should . \ 

9 Among the possible explanations are: (1) the Huffy Letter contained an inadvertent l1).istake (i.e., its drafter had 

intended to refer to a survivor benefit based on I I I "lifetime"); or (2) the Huffy Letter'S drafter had 

incorrectly interpreted the DRO's language. 

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not depend upon the (incorrect) sumrriary of the DRO in the Huffy letter; and (2) even if 

Interpretation 1 applies to the DRO as stated in the Huffy Letter, such an interpretation would 

not meet the requirements for a QDRO (for the reasons explained below). . 

2. Does the DRO fail to comply with ERISA because it would require the Plan to provide 

. increased benefits? 

ERISA § 206( d)(3)(D)(ii), which sets forth one of several substantive requirements for 

QDROs, provides that a domestic relations order may be qualified as a QDRO "only if [it] ... 

does not require the plan to provide increased benefits (determined on the basis of actuarial . 

value) .... " . 

PBGC's December 18, 2009 determination provides a lengthy explanation, based on the 

principle of "adverse selection," as to· why the DRO fails to comply with this requirement. 

PBGC's explanation appears to apply, however, only if the DRO is interpreted, consistent with 

Interpretation 1, to provide I Iwith a survivor benefit that is "paid to D as long as she 

lives, and [does] not end upon the death ofl ~.,,10 

As discussed above, we have rejected the above-stated interpretation of the DRO. 

Instead, we have interpreted the DRO as providing I I with the same survivor benefit 

. payments that I I otherwise would receive absent any QDRO. Interpreted in this way, 

which is consistent with Interpretation 2, we concluded ,that the DRO does not require the Plan 

to provide increased benefits in violation of ERISA § 206(d)(3)(D)(ii) - although it cannot be 

qualified for the other reasons that are discussed below. 

3. Does the DRO fail to comply with ERISA because it would provide a "type or form of 

benefit" that is not otherwise provided under the Plan? 

ERISA section 206( d)(3)(D)(i) provides that a domestic relations order may be qualified 

as a QDRO "only if [it] ... does not require a plan to provide any type or form of benefit, or any 

option, not otherwise provided under the plan .... " PBGC determined that the DRO failed to 

satisfy this ERISA requirement under Interpretation 2 (under which I I survivor benefit 

payments end upon the death 0[1 leven iq lis still alive). In PBGC's view, the Plan 

"provided no such form of benefit." In the Appeal, you disagree with PBGC's conclusions on 

this issue. 

As is the'case with shared payment QDROs, the terms of the DRO do not change either 

the total monthly amounts or the timing of the benefit payments that PBGC is required· to 

make. 11 This is because: 

10 PBGC's determination provides persuasive reasons as to why the DRO should not be qualified if Interpretation 

I applies. Thus, if we had interpreted the DRO that way, we would have decided that the DRO failed to comply 

with ERISA section 206( d)(3 )(D)(ii). 

11 The DRO is similar to a typical Shared Payment QDRO in that it provides an alternate payee (c=J with the 

payments that would otherwise be received by another individual G ~ for the other individual's ~ I f) 

lifetime. The DRO differs from a Shared Payment QDRO, however, in that it changes the recipient of a 

benefiCiary 's benefit, while a Shared Payment QDRO changes the recipient of a participant's benefit. 

1ili)6 - Personal Privacyl 
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• The DRO does not change the $4,317.09 monthly benefit thac=J1 will receive forD 

lifetime; 

• The DRO does not change PBGC's benefit obligation if I I dies before CJ As 

would occur if there is no QDRO, PBGC would pay no survivor benefits in this situation; 

• The DRO does not change the amount and/or the duration of the required payments if 

I loutlives c::::::J In that situation, PBGC would be required to pay a monthly 

benefit of $4,317.09 for the remainder 00 I I lifetime. The only difference is that 

the DRO changes the recipient of the payments from I I tol I; and 

• The DRO does not require PBGC to make any benefit payments other than those 

described above. 

\ 

Thus, if the only consideration is whether or not the DRO alters the amount and/or timing of 

payments from what "otherwise [is] provided under the plan," we would find that no change 

would occur under the DRO's terms. 

Although the DRO does not change the amount and/or timing of the required payments, it 

changes the recipient of the payments. I:te:=} dies beforel ~, the DRO would require 

PBGC to pay the survivor benefit tol r (rather than I ~) for as long a~ ~ lives. 

The Plan does not contain a provision under which a survivor benefit is paid to one beneficiary 

based on the remaining lifetime of another individual. Rather, as discussed above under 

"Relevant Plan Provisions," the Plan's terms include only standard language (which mirror 

ERISA's requirements) with respect to QJSAs and QDROs. Thus, based on its change in the 

survivor benefit's recipient, the DRO can be viewed as failing to comply with ERISA section 

206(d)(3)(i) because it would require the payment of a type of benefit not otherwise provided 

under the Plan's terms. 

. We further observe that paying a survivor benefit under the DRO - which would differ 

from other benefits payable under the Plan's terms - would impose administrative requirements 

upon PBGC (as the Plan's trustee) that otherwise would not be present. If PBGC started paying 

survivor benefits to I I based on the DRO, PBGC would need to monitor whether or not 

I I remains alive (even though PBGC is not paying Dbenefits) because PBGC'spayinents 

to I ~ould end upon 1\.1 I feath. Additional administrative difficulties for PBGC 

could occur if I ~ died befor~ ~ - which is a contingency not addressed in the DRO.12 

12 PBGC's December 18,2009 determination states that the DRO's failure to address the contingency under which 

c=J dies first, in combination with its lack of clarity as to whethec=::r would continue to receive survivor 

benefit payments if I I dies fITst, "demonstrates a further reason why the order is not a QDRO: it fails to 

'clearly specif[y]. .. the amount or percentage of the participant's benefits to be paid by the plan to each such 

alternate payee, or the manner in which such amount or percentage is to be determined,' or 'the number of payments 

or period to which such order applies.' See ERISA §206(d)(3)(C)(ii), (iii)." You disagree with PBGC's statement, 

asserting (among other things) that the DRO's failure to address what happens if I I dies first "has absolutely 

no bearing" as to whether the DRO should be qualified. 

The Appeals Board, having decided that the DRO cannot be qualified as a QDRO for other reasons, concluded it 

is unnecessary to resolve the issue of whether or not the DRO meets the specificity requirements in ERISA section 

§206(d)(3)(C)(ii), (iii). 

l(bj6 - Personal Privacyl 
12 

The Appeals Board, in denying the 1 1 appeals, has not relied solely upon the 

DRO's impact upon plan administration, nor is our denial based solely upon the above-stated 

analysis of ERISA section 206(d)(3)(i). Nevertheless, we concluded that those considerations, in 

combination with the other considerations discussed below, support PBGC's determination that 

the DRO cannot not be qualified. 

4 .. Should the DRO be qualified becausd l "waived"D right to the survivor benefit 

in the Divorce Order? 

PBGC's determination stated that the DRO cannot be a QDRO because it impermissibly 

"attempts to divest 1 1 of D statutory right to the survivor benefit after that right had 

already vested." You disagree, asserting thatl ~ validly had waivedD statutory rights to 

the survivor benefit in the Divorce Order. In asserting this position, you contend that PBGC's 

reliance upon the Ninth Circuit's decision in Carmona, which held that a beneficiary could not 

waive D iJ;1terest inC exl ~'s survivor benefits, is misplaced.13 You state that the 

Supreme Court in Kennedy "abrogat~d" that aspect. of Carmona's holding. AB at 9. You further 

contend that the DRO is lawful because it properly designatedl ~ as the alternate payee for 

the survivor benefit that 1 1 had waived. Id. at 9-10. 

Although the Kennedy decision you cite involved a pension plan, the benefit at issue in 

the case was not a QJSA and there was no QDRO - which are both significant distinctions from 

the facts in the I I appeals. Nevertheless, in addressing one of the Respondent's 

arguments, the Supreme Court in Kennedy discussed ERISA's QDRO requirements. The 

Supreme Court concluded that a QDRO: (1) is "[n]ot ... a mechanism for simply renoun~ing a 

claim to benefits"; 14 and (2) cannot cause a right to a benefit to revert from the beneficiary to the 

participant. IS Thus, Kennedy establishes that a waiver of a benefit right (or a reversion of a 

benefit right to/the participant) cannot be accomplished solely through language to that effect in 

a domestic relations order. 

The Supreme Court in Kennedy decided a broader issue that is also relevant to the 

,-----------,1 appeals: Does the anti-alienation provision in ERISA § 206(d)(1) bar any waiver by 

13 Carmona v. Carmona, 603 F.3d 1041 (9th Cir. 2010) (amended opinion). We note that PBGC; in its December 

18, 2009 determination, cited the earlier Carmona decision (published at 544 F.3d 988) that was issued in 2008 

prior to the Kennedy decision. In the amended opinion issued in 2010, the Ninth Circuit concluded that the Kennedy 

decision did not require the Ninth Circuit to change its holding that "QJSA surviving spouse benefits irrevocably 

vest in the participant's spouse at the time of the annuity start date ... and may not be reassigned to a subsequent 

spouse." 603 F.3d at 1048. 

14 Kennedy, 129 S.Ct. at 873. The Supreme Court also stated: "a beneficiary seeking only to relinquishO right to 

benefits cannot do this by a QDRO, for a QDRO by definition requires that it be the 'creat[ion] or recogni[tion of] 

the existence of an alternate payee's right to, or assign[ment] to an alternate payee [of] the right to, receive all or a 

portion of the benefits payable, with respect to a p'articipant under a plan. ", Kennedy, 129 S.Ct. at 873 (citing 29 

U.S.C. § 1056(d)(3)(B)(i)(I)). 0 

15 129 S.Ct. at 873 n.8. The Supreme Court reached this second holding based upon the definition of an "alternate 

payee" (in ERISA § 206(d)(3)(K)) as "any spouse, former spouse, child, or other dependent of a participant who is 

recognized by a domestic relations order as having a right to receive all, or a portion of, the benefits payable under a 

plan with respect to such participant." 

,llli}6 - Personal Privacyl 
'13 

a beneficiary of a pension benefit?16 129 S.Ct. at 868. The Supreme Court, after examining trust 

law principles under which a beneficiary may "disclaim" or "renounce" a benefit under certain 

circumstances, held that ERISA's anti-alienation provision did not bar all benefit waivers. 129 

S.Ct. at 871-72. In reaching this conclusion the Supreme Court stated: . 

We d6 not mean that the whoie law of spendthrift trusts and disclaimers turns up 

in [ERISA § 206(d)(1)], but the general principle that a designated spendthrift can 

disclaim his trust interest magnifies the improbability that a statute written with an 

eye on the old law would effectively force a beneficiary to take an interest willynilly. Common sense and common law both say that "[t]he law certainly is not so 

absurd as to force a man to take an estate against his will." Townson v. Tiekell, 3 

Bam. & Ald. 31,36,106 Eng. Rep. 575, 576-577 (K.B.1819). 

129 S.Ct at 872. 

For the reasons that follow, we conclude that this ho1~ing in Kennedy does not dictate 

how the Appeals Board must decide the I I appeals. First, we observe that, except for 

one situation, the Supreme Court in Kennedy did not elaborate upon the types of benefit waivers 

that a pension plan must (or could) honor notwithstanding ERISA's anti-alienation provision. 17 

The one situation it discussed involved the pension plan's provision that a beneficiary could 

18 disclaim a benefit as provided under section 401(a)(13) of the IRC. The Supreme Court 

indicated that, if the former spouse in Kennedy had executed a valid waiver under this plan 19 provision, the pension plan would not be required to pay the benefit to the former spouse. The 

I I appeals, however, do not involve a disclaimer of benefits under section 401(a)(13) 

of the IRC, and the Plan does not' contain a di~claimer of benefit provision. 

Additionally, Kennedy did not involve the complex statutory and regulatory provisions 

that govern the election and waiver of spousal benefits in defined benefit pension plans. Not 

only was the pension plan in Kennedy exempt from QJSA requirements, but also the pension 

plan's terms "provided~n easy way for [him] to change the [beneficiary] designation, but for 

whatever reason he did not." 129 S.Ct at 876. Thus, Kennedy, unlike these appeals, did not 

involve a potential conflict between a waiver in a divorce decree and the QJSA requirements that 

apply to the election and waiver of spousal benefits. 

16 ERISA § 206(d)(l) states: "Each pension plan shall provide that benefits provided under the plan may not be . 

assigned or alienated." 

17 Although the "common law waiver" at issue in Kennedy was in a divorce decree, the Supreme Court ultimately 

decided that the plan administrator properly disregarded the divorce decree waiver because it conflicted with the 

beneficiary designation made by the former participant in accordance with plan documents. 129 S.Ct. at 875-877. 

Furthermore, the Supreme Court in Kennedy found it unnecessary to decide whether or not the divorce decree in 

that case was a valid disclaimer under common law. See 129 S.Ct. at 872 n.6, which states: "In any event, our point 

is not that Liv's waiver was a valid disclaimer at common law: 'only that reading the terms of29 U.S:C. § 1056(d)(1) 

to bar all non-QDRO waivers is unsound in light ofbackgrourid common law principles." ./ 

18 See Kennedy, 129 S.Ct. at 868 n.l. The Supreme Court also cited the Tax Code's "qualified disclaimer" 

definition at 26 U.S.c. § 2518. 129 S.Ct. at 868. 

19 129 S.Ct. at 877. In Kennedy, however, none of the parties contended that the former spouse had made a valid 

disclaimer under the terms ofthe pension plan. 

llli)6 - Personal Privacyl 
14 

Furthermore, in a recent case (Mf!tschiner v. Hartford Life pnd Accident Insurance Co. 22) 

the Eighth Circuit concluded that Kennedy's holding concerning a beneficiary's right to disclaim 

a benefit should not be given a broad reading. In Matschiner, as in Kennedy, a spouse had 

waived the right to a plan benefit in a divorce decree but had remained the designated beneficiary 

under the plan's documents. . 

The District Court in Matschiner concluded that the divorce decree waiver (rather than 

the beneficiary designation) should be honored in determining who was entitled to the benefit. 

The District Court, referring to footnote 13 in the Kennedy opinion, had distinguished 'its holding 

from Kennedy on the basis that the welfare plan in that case (unlike the pension plan in Kennedy) 

did not have a disclaimer of benefit provision.23 The Eighth Circuit, however, applied the plan 

document rule and reversed the District Court. In holding that the beneficiary designation form 

controlled (rather than the divorce decree), the Eighth Circuit stated: 

Before its discussion rof the plan documents rule, where footnote 13 appears, the 

[Supreme Court in Kennedy] noted that "[c]ommon sense and common law both 

. say that the law certainly is not so absurd as to force a man to take an estate 

against his will." Id at 872 (quotation omitted). We suspect that footnote 13 was 

simply a reminder that "common sense and common law" may apply to prevent 

the plan documents rule combined with ERISA's anti-alienation provision from 

precluding a pension b~nefit plan beneficiary from disclaiming an unwanted 

interest. Here, by contrast, the plan beneficiary, CJ I ~ has claimed 0 

interest in the death benefit. As in Kennedy, the plan documents; not the divorce 

decree, are controlling. 

2010 WL 3910217 at *3. 

In the I lappeals, as was the case in both Kennedy and Matschiner, the 

designated beneficiary, 1 ~ has not formally disclaimed D right to the benefit at issue. In 

fact, there has not yet been any distributable benefit for I I to disclaim, since the 

contingency for the survivor benefit's payment, i.e., =::::J death, has not occurred. The Appeals 

Board further is unable to conclude that I I I waiver of the survivor benefit in the divorce 

decree is the equivalent of a formal benefit disclaimer, noting that courts in Kennedy and in 

Matschiner did not reach such a conclusion. Thus, we reject your contention that Kennedy 

requires PBGC to honor the "waiver',' that I k had made in the divorce decree and had 

reaffirmed in the DRO. . , , 

Indeed, the Ninth Circuit in Carmona, which was confronted with a factual situation that 

is almost identical to that in the I I appeals, decided that the Kennedy decision did not 

require the pension plan to honor the waiver of a survivor benefit in the Carmona's divorce 

. decree. In Carmona, the participant (Lupe Carmona) named his eighth wife (Janis) as his 

22 Matschiner v. Hartford Life ~nd A~cident Ins. Co., No. 09-3576,2010 WL 39i0217 (8th Cir., Oct. 7, 2010). We 

note that the Eighth Circuit's ruling is consistent with the position the Secretary of Labor had advocated as an 

amicus curiae, in that case. The Secretary of Labor has primary enforcement authority for Title I of the ERlSA. In 

Enclosure 9, we provide a copy of the Secretary of Labor's amicus curiae brief. 

23· Footnote l3 in the Kennedy decision states: "The Estate does not contend that Liv's waiver was a valid 

disclaimer under the terms of the plan. We do not address a situation in which the plan documents provide no means 

for a beneficiary to renounce an interest in benefits." Kennedy, 129 S.Ct. at 877 n.l3. 

, I(b)$ - Personal Privacyl 
15 

survivor beneficiary under his pension plan. 603 F.3d at 1048. He then retired and began 

collecting pension benefits. Id. In a subsequent divorce decree, he was granted all benefit rights 

under his p~nsion plans as his sole and separate property; his wife was granted similar rights 

under her own pension plan as her sole and separate property. Id. Lupe then married his ninth 

, wife/(Judy) and petitioned the state court for a QDRO, which would revoke Janis's designation 

as survivor beneficiary of his pension plans and substitute Judy. Id. at 1049. After his death, the 

state court ordered the " 

plan administrators to change the 

I. 

survivor beneficiary to Judy. Id. at 

1049. 

The Carmona court addressed the issue of "whether or not a participant to an ERISA 

regulated Qualified Joint and Survivor Annuity ('QJSA') plan may' change the surviving spouse 

beneficiary , 

after the participant has retired I and the annuity has become payable." Id. at 1047-48. 

The court held that "QJSA surviving spouse benefits irrevocably vest in the participant's spouse 

at the. time of the annuity start date-in this case the participant's retirement-and may not be 

reassigned to a subsequent spouse." Id. at 1048 (footnote omitted). Thus, the Carmona court 

held that Janis, who was the beneficiary under the QJSA at the annuity start date, was entitled to • 

the survivor benefit, rather than Judy. Id. at 1063. 

, As state~ above in footnote 13 to this decision, the Ninth Circuit had issued its first 

Carmona decision before the Supreme Court had decided Kennedy. Later, however, the Ninth 

Circuit issued a revised opinion that (among other things) discussed the holdings in Kennedy. 

The Carmona court acknowledged that, under Kennedy, "ERISA's anti-alienation provision does 

not prohibit ,a surviving spouse beneficiary from waiving his or her interest in plan benefits" if 

the waiver "conform[s] to plan procedures and instruments." Id. at 1060. The Ninth Circuit 

nevertheless decided (notwithstanding this holding in Kennedy) that the waiver of the pension 

benefit in the Carmona's divorce decree did not result in a valid reassignment of the benefit from 

Janis to Judy. Id. at 1061. The Carmona court stated: 

Both the ... plan documents and ERISA's statutory scheme allow for the waiver 

of surviving spouse benefits with both spouses' written consent during the benefits 

election period prior to the participant's retirement. 29 U.S.C. § 1055(c)(3). That 

procedure was not followed here. Judy has identified nothing in the ... plan 

documents which require the plan administrator to redirect surviving spouse 

benefits to Judy, who was not, at the time of retirement and vesting, either a 

present or former spouse. Even if it is assumed that Janis had the authority to 

disclaim benefits, there is nothing that provides for them to be assigned instead to 

Judy. 

Id. 

The Appeals Board found that the Huffy Plan is . similar to the above-described pension 

plan in Carmona in that both plans: (1) provided for waiver of the surviving spouse benefits with 

written consent during the benefits election period prior to the participant's retirement; and (2) 

did r:ot permit a change in the benefit form or in the designated beneficiary after payments 

began. Additionally, it appears that the pension plan in Carmona, as is the case with the Huffy 

Plan, did not contain a disclaimer of benefits provision. As the Ninth Circuit concluded in 

Carmona, we similarly decided that, even if we assume that I ~ has the authority to disclaim 

the Plan's survivor benefit, that benefit cannot be reassigned to I ~ through a QDRO. 

Additional reasons for this holding are presented in the next section of this decision. 

iW6 -Personal Privacyl 
16 

5. Did PBGC correctly determine tha1 ~ could not validly transferr survivor 

benefit interest td ~ through a QDRO? 

PBGC's QDRO policy (Enclosure 8) clearly precludes a waiver of survivor benefits and 

reassignment to a subse-quent spouse through a QDRO, if (as is the case here) the waiver occurs 

after the participant enters pay status. PBGC's Operating Policy 6.6-3, at section E.9, states: 

Spousal Rights of Alternate Payee 

Qualification 

If a participant is married as of his annuity starting date, and his spouse has not 

waived her right to a QJSA, that spouse retains the right to the survivor annuity 

even if the participant and spouse later divorce. PBGC will not qualify an order 

under which the alternate payee would relinquish the surviving spouse benefit 

("reverse QDRO") under ajoint-and-survivor annuity that is in pay status. 

PBGC's policy is consistent with the judicial decisions that have addressed the purported 

waivers of QJSA survivor benefits through QDROs. As PBGC stated in its December 18, 2009 

determination, "the majority of the federal courts that have considered the issue have held that, 

because the survivor rights-irrevocably vest at the annuity starting date, a subsequent domestic 

relations order cannot reassign the spouse's rights to this benefit." The Appeals Board, like 

PBGC, has examined federal case law and similarly has found that the majority of the decisions 

26 support PBGC's position.

The Carmona decision, .in particular, contains a detailed analysis of this issue. The 

Carmona court noted that, under ERISA § 205(c)(2), (7), "[b]oth spouses, if they are going to 

decline QJSA benefits, may only do so during the applicable election period which is defined as 

'the 180-day period ending on the annuity starting date. '" 603 F .3d at 1057. The Carmona 

court then concluded, based on those ERISA provisions, that ."the annuity starting date ... is the 

point at which the surviving spouse benefits vest in the participant's spouse.,,27 . 

Carmona, after discussing the 1984 Retirement Equity Act (REA) amendments to 

ERISA, further explained that Congress created surviving spouse benefits, like those found in 

QJSAs, "to protect non-participant spouses, particularly those that may not work outside the 

home and thus may not have independent retirement benefits." Jd at 1058. See also Boggs v. 

Boggs, 520 U.S. 833, 843 (1997). Although the Carmona court recognized that the rule under 

which survivor benefits vest on the annuity starting date would 'not always protect a nonworking spouse, it nonetheless concluded that such a rule provides protection "in many 

situations involving a post-retirement attempt to transfer surviving spouse benefits." 603 F.3d at 

1058. The court then stated: 

26 See Carmona, supra; Hopkins v. AT&T Global In/o. Solutions Co., 105 F.3d 153 (4th Cir. 1997); Rivers v. S. W. 

Corp., 186 F.3d 681 (5th pro 1999); and Montgomery V. AGC-Int'l Union o/Operating Eng'rs Local 70] Pension 

Trust Fund, No. 08-3129-CL, 2010 WL 1406566 (D. Or. AprilS, 2010). 

27 603 F.3d at 1057. In reaching this conclusion, the Ninth Circuit in Carmona cited the Fourth Circuit's similar 

reasoning in the Hopkins case. See 105 F.3d at 156-57. 

1@6 - Personal Privacyl . 
17 

The finely tuned congressional scheme would not be served by state court DROs 

that attempt to divest a non-working spouse's interest inC surviving spouse 

benefits. Similarly, congressional intent is not advanced by permitting a 

subsequent post-retirement spouse to collect benefits accrued during an economic 

partnership she or he was not a part of. 

603 F.3d at 1058. 

Accordingly, based on PBGC policy and the weight of federal case law, the Appeals 

Board decided that the DRO cannot be qualified. 

6. Must PBGC qualify the DRO based on the legal doctrines of "waiver" and/or "estoppel"? 

For the reasons stated below, we further concluded that the ,contentions in the Appeal 

Brief with respect to the doctrines of "waiver" and "estoppel" do not provide a sufficient basis 

for the Appeals Board to grant thel ~ appeals. 

Waiver. The Appeal Brief asserts that the former Plan administrator, in qualifying the 

DRO as a QDRO, "waived it defenses to the QDRO, including those set forth in PBGC's 

December 18th [2009] letter." AB at 5. Stating that "waiver" is "the intentional relinquishment 

of a known right," you contend that employee benefit plans like the Plan can waive defenses to 

benefit claims. Id. at 3. You argue that, at all times prior to August 2003, the Plan was "aware of 

the defenses it could raise to c=:J request to designatel ~ the survivor beneficiary 00 

QJSA," but the Plan failed to assert them. Id. 

In support of the above-stated position, you refer to the following facts: 

• In January 2003, the Plan administrator asked its attorneys to review the Divorce Order to 

determine whether the division of the benefits under it was proper under ERISA and the 

Internal Revenue Code. Id. 

• The Plan's legal counsel then advised the Plan administrator, in th~ ~ Letter, that 

the Plan could honor I I request to designate I I as the survivor 

beneficiary of 0 QJSA, if a QDRO with appropriate terms was obtained. Id. at 4. 

• the Plan administrator next asked its attorneys to draft a qualified domestic relations 

order specifically for CJ with the DRO being the product of that request. Id. 

• The Plan further forwarded its draft DRO tc=Jn and, on March 13,2003, advised him to 

have D counsel review it, finalize it, and then to send a copy back to the Plan "for 

review prior to filing." Id. 

• The DRO, after being approved 

a 

by the court on August 3, 2003, then was filed with the 

Plan, who approved it as QDRO on August 15, 2003 in the Huffy Letter. ld. at 4-5. . 

l(b)61- Personal Privacyl 
18 

As you correctly state in the Appeal Brief, courts have defined "waiver" as "the voluntary 

or intentional relinquishment of a known right.,,28 We disagree, however, with your conclusion 

that the former Plan administrator had "waived" its rights with respect the QDRO under this 

definition. If the former Plan administrator had "known" that the DRO did not comply with 

ERISA's requirements but decided to qualify it anyway, then arguably a "waiver" could have' 

occurred. In this case, however, the evidence establishes oniy that the former Plan administrator 

(after consulting its oWn legal counsel) had interpreted the applicable law incorrectly in its 

communications with c=J legal counsel and when it qualified the DRO. We do not consider 

the error in legal interpretation that occurred here to be equivalent to a "voluntary" or 

"intentional"\relinquishment of a known right. 

We are unaware of any ERISA court decision holding that a pension plan had "waived" 

its right to apply the correct legal precedent because it previously had provided a party with an 

incorrect interpretation of the law. Furthermore, in our view, basing a decision upon the legal 

doctrine of waiver is particularly inappropriate in situations (such as thel I appeals) 

where a third party is affected. As discussed above, the effect of our decision is that I I 

retained 0 right to be treated as the beneficim;y of the survivor annuity portion of I I 

benefit. If, instead, we granted thq f appeals based on waiver, I I would be 

denied the survivor benefit that, under applicable legal precedent, she is entitled to retain. 

We further observe that at least one of the Circuit Courts of Appeals has expressly 

29 declined to incorporate the principle of waiver into the federal common law of ERISA. Other 

circuits, however, have concluded that waiver may be properly asserted as a defense under 

certain circumstances.3D The cases where waiver has been permitted as a defense in an ERISA 

case - including all three waiver cases cited in the Appeal Brief~ generally have involved claims 

for health insurance, disability insurance, or other similar benefits in welfare plans. In such 

cases, 'the courts have applied applicable insurance law principles, which, under certain 

circumstances, prevent an insurer from asserting; a defense it had previously waived. 31 Such 

insurance law principles do not apply t6 the claims in th1 r appeals - nor are we 

, aware of any other basis in the law that would provide your clients with a successful waiver 

defense. " 

28 See Pitts v. American Security Life Ins. Co., 931 F.2d 351, 357 (5th Cir. 1991), which you cite in the Appeal 

Brief, and the cases cited therein. 

29 White v. Provident Life & Ace. Ins. Co., 114 F.3d 26,29 (4th Cir. 1997) (stating that the common law of ERISA 

"does not incorporate the principles ofwai~er and estoppel"). "-

30 Such court decisions include the three cited in the Appeal Brief: Pitts, supra note 28; Rhorer v. Raytheon Eng'rs 

and Constructors, Inc., 181 F.3d 634 (5th Cir. 1999); and Lauder v. First UNUM Life Ins. Co., 284 F.3d 375(2d 

Cir.2002). 

31 I~ Lauder, for example, the court recognized that "under the law applicable to insurance policies, anI insurer may 

be barred from raising defensesnot asserted in communications to the insured denying coverage." 284 F.3d at 380. 

The court in Pitts referred to the insurance law principle that "an insurer automatically waives the terms of a policy 

if it defends an insured without a reservation of its rights." 931 F.2d at 357. 

1@6 - Personal Privacyl 
19 

Estoppel. The Appeal Brief asserts that a claim of estoppel arises "when one party has 

made a misleading representation to another party and the otherparty has reasonably relied to 0 

detriment on that representation. ,,32 You state that estoppel applies to th~ f appeals 

for the following reason: 

Here, the Plan represented that the QDRO (which its attorneys drafted and the 

Plan approved) was consistent with the Plan Document. Because of the Plan's 

representation, the 1 Idid not seek an order that would have required 

the Plan to pay the QJSA survivor benefits to I I based on D lifetime. Had 

the I I sought and obtained such an order, it would have satisfied the 

statUtory requirements for a qualified domestic relations order. Thus, in the event 

the Plan's representation was incorrs:ct and the QDRO is not a qualified domestic 

relations order because it would require the Plan pay benefits not otherwise 

available under the Plan Document, the I I will have relied to their 

detriment on the Plan's representations, and the PBGC, acting on behalf of the 

Plan, is estopped to deny the validity and enforceability of the QDRO. AB at 5 

(citations omitted). 

As indicated by the quoted language, your estoppel argument is based upon the position 

that, absent the Plan's representations, the I I would have obtained a .valid domestic 

relations order. The flaw in your position is that a domestic relations order drafted in the way 

that you suggest -'"-or in any other manner - would not be valid because it improperly would 

divest I I ofD right inD vested survivor benefit.33 Thus, the theory you advance does 

not establish detrimental reliance because - irrespective of the Plan's representations -I I P 

survivor benefit could not be transferred to I f through a QDRO. -

Moreover, several federal courts have held that a party raising an equitable estoppel claim 

against the government must not only prove all the elements of equitable estoppel, but also that 

the government committed ·affirmative misconduct going beyond mere negligence. 34 Two 

federal district courts have applied this holding in cases involving claims against PBGC. 35 There 

is no evidence in the I I appeals of affirmative misconduct by PBGC. 

For estoppel claims that do not involve the federal government, courts generally have 

held that the five elements of equitable estoppel are: (1) the party to be estopped misrepresented 

\ material facts; (2) the party to be estopped had actual or constructive knowledge of the true facts; 

32 The Appeal Brief cites Moore v. EZue Cross and Blue Shield of The National Capital Area, 70 F.Supp.2d 9, 26-

27 (D.D.C.1999). ' 

33 Moreover, if the DRO had been drafted so as to provide a survivor benefit to c:::=J "based onO iifetime,"it 

improperly would have required the Plan "to provide increased benefits (determined on the basis of actuarial 

\;"alue)." See ERISA § 206(d)(3)(D)(ii) and discussion concerning "adverse selection" in PBGC's August 3,2003 

benefit determination. 

34 See, e.g., Rutten v. Us., 299 F.3d 993,995 (8th Cir. 2002). 

35 See PBGC v. While Consolidated Indus., 72 F.Supp.2d 547 (W.D. Pa. 1999); Szydlowskiv. PBGC, 37 Employee 

Benefits Cas. 2643 (E.D. Mo. 2006). -

l(b)6 - Personal Privacyl 
20 

(3) the party to be estopped intended that the misrepresentation be acted upon or had reason to 

believe that the party asserting estoppel would rely on it; (4) the party asserting·the estoppel did 

not know, nor should have known,. the true facts; and (5) the party asserting the' estoppel 

reasonably a~d detrimentally relied on the misreprysentation. See, e.g., Moore, supra, 70 

F.8upp.2d at 31 (citing Heckler v. Community Health Services of Crawford, 467 U.S. 51, 59 

(1984)). 

The Appeals Board concluded that the facts in th~ ~ appeals do not establish a 

valid equitable estoppel claim under this five-part test. In so holding, we found that: (1) the 

claim of estoppel in the I f appeals does not involve the misrepresentation of "material 

facts," but rather involves the communication of a legal opinion; (2) there is no evidence that the 

party being estopped (i.e., the Plan) had "actual or constructive knowledge" of any "true facts" 

that differed from what had been communicated to the party asserting estoppel (i.e., to[=:Jl); (3) 

this is not a case where the "party asserting the estoppel did not know, nor should have known, 

the true facts"; we note in this regard thatc=:Jl had retained independent legal counsel, who was 

responsible for identifying any legal problems with the DRO; and (4) the evidence does not 

establish that that c=J (orl· D "reasgnably and detrimentally relied" upon the Plan's 

representations concerning the DRO. 

Decision 

Having applied the prOVIsIOns of the Plan, the provisions of ERISA, and PBGC 

regulations and policies to the facts in this case, the Appeals Board has denied the appeals you· 

filed on behalfofCI I and I II ,. 

This decision is PBGC's final Agency action. The Appeals. Board has been informed that 

you have filed a court action in the United States District Court for the District of Columbia. 

That legal action has been stayed pending the issuance of this Appeals Board decision. 

If you, I fori I need any other information concerning PBGC 

benefits, please contact PBGC' s Authorized Plan Representative at 1-800-400-7242. 

Sincerely, 

Charles Vemon 

Appeals Board Chair 

[@6 -Personal Privacyl