Opinion ID: 609747
Heading Depth: 2
Heading Rank: 2

Heading: The REA Applies to Unamended Pension Plans.

Text: 17 Although contributions to the pension plans were terminated on December 31, 1984, Judge Duffy concluded that the plans themselves had not terminated for the purposes of REA applicability. In re Lefkowitz, 767 F.Supp. at 508-09. Thus, the question is whether the REA applies to pension plans that have not been amended to provide for QPSAs. The REA provides in relevant part: 18 Each pension plan to which this section applies shall provide that -- 19       20 (2) in the case of a vested participant who dies before the annuity starting date and who has a surviving spouse, a qualified preretirement survivor annuity shall be provided to the surviving spouse of such participant. 21 29 U.S.C. § 1055(a)(2) (emphasis added). 22 Congress enacted the REA on August 24, 1984, but provided that the statute would not be effective until after December 31, 1984. Nevertheless, it enacted a transitional rule, § 303(c)(2), that provided in relevant part: 23 In the case of any participant-- 24 (A) who has at least 1 hour of service under the plan on or after the date of the enactment of this Act or has at least 1 hour of paid leave on or after such date of enactment, 25 (B) who dies before the annuity starting date, and 26 (C) who dies on or after the date of the enactment of this Act and before the first day of the first plan year to which the amendments made by this Act apply, 27 the amendments made by sections 103 and 203 shall be treated as in effect as of the time of such participant's death. 28 Pub.L. 98-397, Title III, § 303(c)(2) (emphasis added). 29 Thus, the transitional rule applied the QPSA provisions to pension plans where a plan participant died after August 24, 1984, the day of enactment, but before the first day of the first plan year that began after December 31, 1984. The relevant treasury regulation indicates that in such cases the REA will apply even where the plan was not amended to comply with the statute: 30 Q-42: Must a plan be amended to provide for the QPSA required [by the transition rule]? 31 A-42: A plan will not fail to satisfy the qualification requirements of [the transition rule] merely because it is not amended to provide a QPSA [required by the transition rule]. The plan, however, must satisfy those requirements in operation. 32 26 C.F.R. § 1.401(a)-20 (1992) (emphasis added). 33 The district court relied on this transition rule in reaching its conclusion that the REA applied to the pension plans in this case, notwithstanding Arcadia and Bay Novelty's failure to amend the plans in compliance with the statute. While the district court's ultimate conclusion was correct, it erred when it applied the transitional rule directly to the plans in this case. For these plans, the relevant plan year began on March 1, 1985. Thus, the transitional rule would apply only if Nicholas had died between August 24, 1984, and March 1, 1985, the first day of the first plan year after the effective date of the act. Nicholas, however, died in 1987; thus, Adrienne correctly argues, the transitional rule does not directly apply to the plans in this case. Any other reading would turn the transitional rule into a permanent rule. 34 Adrienne further contends that the REA does not apply because the pension plans were not amended to comply with the REA. From the statutory provision that [e]ach pension plan    shall provide for a QPSA, she would infer that compliance by any particular plan with the REA is optional. We disagree. 35 First, Adrienne's reading of the statutory language is flawed. [M]uch of the trouble in statute drafting originates in the use of shall. Bryan A. Garner, A Dictionary of Modern Legal Usage 516 (1987). As Professor Garner notes, [t]he word shall ordinarily connotes language of command. Id. at 502. Adrienne, however, would read the word shall as if it did not command an obligation. Under her interpretation, the REA would automatically apply via the transitional rule to unamended pension plans where a participant dies before the first day of the first plan year after the statute's effective date, but would apply in all other circumstances only if the plans themselves formally adopted the REA's QPSA provisions. 36 Reading the statute as a whole, we are satisfied that congress intended the QPSA provisions of the REA to be mandatory, not optional. The transitional rule was designed to provide immediate protection for spouses of participants who might die soon after the statute was enacted. This concern for immediate protection upon enactment, notwithstanding that the other provisions of the amendment had a delayed effective date, indicates that congress clearly did not intend that the REA could be accepted or rejected at the discretion of pension plan administrators. 37 Second, experts in the field believe that the QPSA benefit is automatic unless it is specifically and effectively waived. Ronald J. Cooke, ERISA Practice and Procedure § 4.44, at 4-136 (1992); see also Research Institute of America, Pension Coordinator p 51,040 (1993) (QPSA required whether or not plan seeks tax qualification). 38 Third, the statute that confers federal jurisdiction over this matter permits a plan beneficiary, such as a spouse claiming an entitlement to a QPSA, to seek judicial enforcement of a benefit conferred by ERISA. A plan beneficiary may bring a civil suit (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan. 29 U.S.C. § 1132(a)(3) (emphasis added). See also Massachusetts Laborers' Health & Welfare Fund v. Starrett Paving Corp., 845 F.2d 23, 27 (1st Cir.1988) (statute permits plan beneficiary to enforce a plan's terms or to enforce other, substantive provisions of ERISA). 39 Finally, REA's legislative history also demonstrates congress's intent to ensure the mandatory application of REA to pension plans. Congress felt it was inequitable for a participant's spouse to receive no survivor benefits under the plan even though the participant had accrued significant vested benefits before death. Therefore,    it is appropriate to provide automatic survivor benefits to the spouses of vested participants. S.Rep. No. 98-575, 98th Cong., 2d Sess. 12 (1984), reprinted in 1984 U.S.C.C.A.N. 2547, 2558; see also Hurwitz, 982 F.2d at 781. This desire to benefit spouses of pension plan beneficiaries implies an intent to apply the REA to pension plans whether or not they were amended to provide a QPSA, because to hold otherwise would permit recalcitrant administrators of pension plans to avoid providing spousal benefits simply by declining to amend their plans after the transitional rule expired. 40 We conclude that the district court properly determined that the automatic QPSA provisions of the REA applied to these pension plans. Since it is undisputed that Irene did not consent to Nicholas's 1987 designation of Adrienne as the beneficiary, see 29 U.S.C. § 1055(c)(2); see also Cooke, supra, § 4.44, her estate is entitled to the QPSA. 41 Affirmed.