Opinion ID: 3035622
Heading Depth: 2
Heading Rank: 3

Heading: statutory interplay between qdros and

Text: SURVIVOR BENEFITS [8] The Plans and Mary argue that under ERISA, a QDRO can divest a surviving spouse of her statutorily-guaranteed right to a QPSA only if the QDRO expressly assigns surviving spouse rights to a former spouse. See 29 U.S.C. §1056(d)(3)(F). This is a question of first impression in this circuit. “In interpreting the statutes in question, ‘[o]ur task is to construe what Congress has enacted. We begin, as always, with the language of the statute.’ ” Navajo Nation v. Dep’t Health & Human Services, 325 F.3d 1133 (9th Cir. 2003) (en banc) (quoting Duncan v. William, 533 U.S. 167, 172 (2001)). When looking to the plain language of a statute, “we do more than view words or subsections in isolation. We derive meaning from context, and this requires reading the relevant statutory provisions as a whole.” California ex rel. Locklear v. F.E.R.C., 383 F.3d 1006, 1016 (9th Cir. 2004) (internal quotation marks omitted). [9] Under ERISA, “a qualified preretirement survivor annuity [QPSA] shall be provided to the surviving spouse,” 29 152 HAMILTON v. WASHINGTON STATE PLUMBING U.S.C. § 1055(a)(2) (emphasis added), absent one exception —spousal consent to waiver of the benefit, id. at § 1055(c)(2). As the Supreme Court observed in Boggs, congressional concern for the “economic security of surviving spouses,” is evident from the “expansive coverage of § 1055[‘s]” requirements, which apply to all individual account plans and defined benefit plans, see 29 U.S.C. § 1055(b)(1), and the requirement of spousal consent, which prevents “[e]ven a plan participant [from] defeat[ing] a nonparticipant surviving spouse’s statutory entitlement to an annuity.” Boggs, 520 U.S. at 843. [10] Section 1055 must be read in conjunction with § 1056(d)(3)(F), which provides that “[t]o the extent provided in any qualified domestic relations order,” surviving spouse rights may be assigned to a “former spouse.” The ordinary interpretation of the phrase “to the extent provided” means that any assignment of surviving spouse rights in a QDRO must be explicit, rather than implicit. In other words, any effort to alienate surviving spouse rights in advance must be spelled out in the QDRO. The provision also makes clear that surviving spouse rights must be assigned to a “former spouse.” By statutory fiat, a former spouse can be treated as “the surviving spouse” in this limited circumstance. But the bottom line is that the survivor spouse annuity is payable only to the individual qualifying as a “surviving spouse” or “former spouse.” The Children argue that § 1056(d)(3)(F) does not exhaustively delineate how a QDRO can assign surviving spouse rights, but instead exemplifies one particular scenario: where the “alternate payee” happens to be a “former spouse.” The Children urge that their QDRO is not governed by the language of §1056(d)(3)(F). To accept this argument, we would have to assume that while Congress intended for there to be multiple ways to assign surviving spouse rights in a QDRO— e.g., to children as well as to a former spouse—the legislature decided to reference explicitly only one of those ways in HAMILTON v. WASHINGTON STATE PLUMBING 153 § 1056(d)(3)(F)—the former spouse scenario—and leave us guessing about the rest—e.g., the children scenario. Such an interpretation is not only unlikely given the comprehensive nature of the QDRO provision, but it is also at odds with the mandatory language and strict spousal consent provisions of § 1055. Together these provisions make clear that Congress intended to tightly circumscribe exceptions to the mandatory surviving spouse annuity. [11] Although § 1056(d)(3)(A) requires a pension plan to “provide for the payment of benefits in accordance with the applicable requirements of any [QDRO],” this directive does not change our conclusion. Section 1056(d)(3)(A) cannot be read in isolation as the Children suggest. A QDRO must generally be enforced, it is true. But it may intrude on a surviving spouse’s preretirement annuity only in the specific manner set forth in § 1056(d)(3)(F). Giving meaning to the plain language of the statute, we conclude that Mary cannot be divested of her right to a QPSA under § 1055 unless the QDRO explicitly assigned those rights to a former spouse.9 Here, the purported QDRO did not do so. 9 In a similar vein, the Children argue that §1056(d)(3)(F) should be read as an extension of § 1056(d)(3)(C)’s specificity requirements, applicable to one particular scenario: where the “alternate payee” happens to be a “former spouse.” As noted earlier, the “specificity requirements” for a QDRO are set forth in § 1056(d)(3)(C), which provides that “[a] domestic relations order meets the requirements of this subparagraph only if such order clearly specifies . . .” (emphasis added). By contrast, the language of § 1056(d)(3)(F) already assumes that a valid QDRO exists: “To the extent provided in any qualified domestic relations order . . .” (emphasis added). Thus, while § 1056(d)(3)(F) does not technically set forth another specificity requirement for a potential QDRO, it does require a valid QDRO to specifically assign surviving spouse rights. These provisions are best viewed as a series of separate hurdles. The first hurdle is subsection C’s specificity requirements, which apply no matter what type of pension right is being assigned in a dissolution order. But if parties to a dissolution order seek to assign surviving spouse rights, then the second hurdle— § 1056(d)(3)(F)—comes into play. Ultimately, the question remains the same: whether Congress intended for the second hurdle to apply whenever surviving spouse rights were at issue. We conclude that Congress did. 154 HAMILTON v. WASHINGTON STATE PLUMBING Although the Supreme Court has not addressed the precise issue here, our interpretation follows the logic of Boggs. In Boggs, the Supreme Court held that ERISA prohibited a nonparticipant spouse from making a testamentary transfer of her interest in undistributed pension plan benefits to her sons. Boggs, 520 U.S. at 844. The Court explained that “ERISA’s silence with respect to the right of a nonparticipant spouse to control pension plan benefits by testamentary transfer provides powerful support for the conclusion that the right does not exist.” Id. at 843, 847-48. The Court went on to note that “ERISA’s solicitude for the economic security of surviving spouses would be undermined by allowing a predeceasing spouse’s heirs and legatees to have a community property interest in the survivor’s annuity.” Id. at 843. To be sure, a testamentary transfer is not a QDRO. See Alabamis v. Roper, 937 F.2d 1450, 1455 (9th Cir. 1991). In light of the comprehensive nature of the QDRO provision, ERISA’s silence as to the ability of a QDRO to override a surviving spouse’s QPSA —except as set forth in § 1056(d)(3)(F)—supports the view that § 1056(d)(3)(F) is the exclusive override method, not merely illustrative, as urged by the Children.10 Our reading of the statute is also consistent with the interpretation of other circuits. In Dorn v. International Bhd. of 10 The Third Circuit in McGowan v. NJR Service Corporation recently applied Boggs’s reasoning in a similar fashion to conclude that the QDRO exception to ERISA’s anti-alienation provision “is to be narrowly construed” and does not permit the alienation of benefits through waiver: Applying [Boggs’s] reasoning to the case at hand, ERISA’s silence with respect to the right to waive benefits supports the conclusion that such a right does not exist. The comprehensive nature of the QDRO provision suggests that Congress provided only one option to individuals in McGowan’s position. In other words, the QDRO provision, which . . . give[s] rise to the strong implication that the designation of alternate payees under other circumstances (i.e., through waivers) is not consistent with the statutory scheme. 423 F.3d 241 (3rd Cir. 2005) at 249-50 (internal quotation marks omitted). HAMILTON v. WASHINGTON STATE PLUMBING 155 Elec. Workers, 211 F.3d 938, 941 n.5 and 947 (5th Cir. 2000), the Fifth Circuit concluded that while a QDRO entitled a former spouse to a portion of her ex-husband’s monthly pension annuity during his lifetime, she was not entitled to a survivor’s annuity under ERISA because “the domestic order nowhere designates her as the surviving or ‘qualified’ spouse for purposes of any survivor benefit.” The Third Circuit explained in Samaroo v. Samaroo, 193 F.3d 185, 187 n.2 (3rd Cir. 1999), that the terms of a divorce decree were insufficient to entitle a participant’s ex-wife to a preretirement surviving spouse annuity because the decree “was silent on the issue of survivor’s rights.” We acknowledge that these cases did not address a conflict between children of a former marriage and a surviving spouse. Like us, however, these circuits have interpreted the statute to require an explicit assignment of surviving spouse rights in a QDRO; a general designation of an alternate payee as a pension beneficiary does not serve to designate surviving spouse benefits. It bears noting that our interpretation is consistent with Department of Labor (DOL) and Internal Revenue Service (IRS) publications that provide guidance in the drafting of QDROs.11 The DOL has explained: A QDRO may provide for treatment of a former spouse of a participant as the participant’s spouse with respect to all or a portion of the spousal survivor benefits that must be provided under Federal law. . . . Only a spouse or former spouse of the par- ticipant can be treated as a spouse under a QDRO. A child or other dependent who is an alternate payee under a QDRO cannot be treated as the spouse of a participant. 11 The QDRO exception is codified both in the labor code and the tax code. Because “the two parallel provisions were created by the same legislative act and contain precisely the same language, they are interpreted identically.” Hawkins, 86 F.3d at 988 n.5; see also I.R.C. § 401(a)(13)(B) (2005); 29 U.S.C. § 1056(d)(3). 156 HAMILTON v. WASHINGTON STATE PLUMBING DOL, Appendix D - Drafting a Qualified QDRO, in QDROS: THE DIVISION OF PENSIONS THROUGH QUALIFIED DOMESTIC RELATIONS ORDERS (Dec. 2005), available at http://www.dol.gov/ ebsa/publications/qdros_appD.html (“DOL Guide”). The IRS offers an identical interpretation, namely that the QDRO can name only a spouse or former spouse as a beneficiary of spousal survivor rights. IRS Notice 97-11, 1997-2 I.R.B. 49, 1996 WL 747904 at app., pt. 1, § E (1997) (“IRS Notice”). Both agencies recommend that the following express language designating surviving spouse rights be included in a QDRO to effectuate the assignment of those rights to an alternate payee: “The Alternate Payee shall be treated as the Participant’s spouse under the Plan for purposes of §§ 401(a)(11) and 41712 of the Code.” Id. at app., pt. 2, § E; DOL Guide. The agencies also caution that such an alternate payee must be a “spouse” and not a “child or other dependant of the Participant.” Id. Our interpretation does not render the QDRO’s assignment of benefits to the Children illusory. If Michael had not remarried, or had he and Mary been married for less than a year prior to his death, the Children would have been entitled to death benefits under the terms of the Plans. Alternatively, if Michael had waived provision of the survivor spouse annuity with Mary’s consent pursuant to § 1055(c)(2), the Children would have been eligible for death benefits. Perhaps the most effective way of ensuring the Children’s receipt of benefits in the event of Michael’s pre-retirement death (if this, in fact, was the parties’ intention at the time of divorce) would have been to assign surviving spouse rights to Michael’s former spouse in a QDRO, and she in turn could have transferred those benefits to the Children. [12] In short, designating children in a QDRO as alternate payees under a pension plan can provide a myriad of potential benefits to the children, depending on their ages, the date of 12 Sections 401(a)(11) and 417 of the tax code are analogous to the surviving spouse provisions in the labor code, 29 U.S.C. § 1055. HAMILTON v. WASHINGTON STATE PLUMBING 157 the participant’s disability, retirement, or death, and the participant’s marital status. But as to a preretirement surviving spouse annuity, ERISA does not permit children to be designated as alternate payees in a QDRO. Only the surviving spouse (or a former spouse properly designated) is eligible for those benefits. The Children cite a number of cases in which courts have awarded life insurance proceeds to the alternate payee (children or former spouse) named in a QDRO over the competing claims of the participant’s widow, absent an express designation of surviving spouse rights. See Metropolitan Life Insurance Co. v. Marsh, 119 F.3d 415, 422 (6th Cir. 1997); Metropolitan Life Ins. Co. v. Wheaton, 42 F.3d 1080, 1085 (7th Cir. 1994); Carland v. Metropolitan Life Ins. Co., 935 F.2d 1114, 1121 (10th Cir. 1991). These cases are inapposite because life insurance policies are not subject to § 1055’s surviving spouse provisions, see § 1055(b) (“[T]his section shall apply to . . . any defined benefit plan [and] any individual account plan . . .”). The widows in these cases each claimed benefits as a named beneficiary under the life insurance policy, not as a surviving spouse under § 1055. Thus, the analysis in these cases does not alter our conclusion.