Opinion ID: 17522
Heading Depth: 2
Heading Rank: 1

Heading: Denial of Benefits Due

Text: Great Empire interpreted the Plan and Matassarin’s QDRO to require segregation of Matassarin’s Plan benefits into an account that will accrue minimal interest until Danny Jenkins reaches retirement age. Matassarin contends that her benefit due should continue to be 520.086 shares of Great Empire shares at current share value, or alternatively that she, along with other segregated-account holders, should have the opportunity to receive a cash distribution equal to the current fair market value of her shares. ERISA § 502(a)(1)(B) states: “A civil action may be brought . . . by a participant or beneficiary . . . to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan . . . .” 29 U.S.C. § 1132(a)(1)(B). As a QDRO recipient, Matassarin has 12. Because we affirm the grants of summary judgment, we do not consider whether appellee Menke & Associates could face liability as a Plan fiduciary within 29 U.S.C. § 1002(21)(A)’s definition of a fiduciary. -21- standing to bring these claims. See Boggs v. Boggs, 520 U.S. 833, ---, 117 S. Ct. 1754, 1763 (1997) (“In creating the QDRO mechanism Congress was careful to provide that the alternate payee . . . is to be considered a plan beneficiary.”); see also 29 U.S.C. § 1056 (d)(3)(J). The Great Empire ESOP gives its administrator discretionary authority to construe the Plan terms.13 When a plan gives such discretion, a district court will overrule the plan administrator’s interpretation of plan terms only if the interpretation is “arbitrary and capricious.” See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S. Ct. 948, 955 (1989); Wildbur v. ARCO Chemical Co., 974 F.2d 631, 637-39 (5th Cir. 1992). The “arbitrary and capricious” review amounts to an abuse-of-discretion standard. See McDonald v. Provident Indemnity Life Insurance. Co., 60 F.3d 234, 236 (5th Cir. 1995). Applying the same standards as the district court, this Court reviews the Great Empire ESOP administrator’s interpretation of Plan terms for abuse of discretion. We do not afford such deference to the Plan administrator’s interpretation of Matassarin’s QDRO. A court reviews de novo a 13. Plan § 18(a)(2)(A), in both the original and the amended version, provides, in part, “All decisions required to be made by the [Plan administrative] Committee involving the interpretation, application and administration of the Plan shall be resolved by majority vote either at a meeting or in writing without a meeting.” -22- plan administrator’s legal conclusions regarding the meaning of a contract or statute. Cf. Penn v. Howe-Baker Engineers, Inc., 898 F.2d 1096, 1100 (5th Cir. 1990) (reviewing de novo a plan administrator’s determination as to whether an employee was an independent contractor for coverage purposes). The QDRO, unlike the Plan, is a separate, judicially approved contract between Jenkins and Matassarin, which the Plan administrator has no special discretion to interpret. Although we allow a plan administrator discretion to determine whether an agreement constitutes a QDRO under the plan, we otherwise review de novo a plan administrator’s interpretation of the meaning of a QDRO. See Hullett v. Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107, 114 (3d Cir. 1994) (finding that a district court “did not err in holding that it should review de novo the plan administrator’s construction of the [divorce agreement], which invoked issues of contract interpretation under the Agreement and not the plan”).
Congress created the QDRO structure in the Retirement Equity Act (“REA”) of 1984, which amended ERISA. Through the REA, Congress enhanced ERISA’s protection of divorced spouses and their interest in retirement funds earned during marriage. See Boggs, 520 U.S. at ---, 117 S. Ct. at 1763. “The QDRO provisions protect those persons who, often as a result of divorce, might not receive the benefits they otherwise would have had available -23- during their retirement as a means of income.” Id. at ---, 117 S. Ct. at 1767. In order to accomplish this, the REA amendments require that “[e]ach pension plan shall provide for the payment of benefits in accordance with the applicable requirements of any qualified domestic relations order.” 29 U.S.C. § 1056(d)(3)(A). Furthermore, “[e]ach plan shall establish reasonable procedures to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders.” 29 U.S.C. § 1056(d)(3)(G)(ii). The QDRO in this case assigned Matassarin one-half of Jenkins’s “[i]nterest [in] the assets accredited to [his] ESOP Accounts as of October 15, 1991.” It also “require[d] that the Administrator of the Great Empire Broadcasting, Inc. ESOP segregate [Matassarin’s assigned] Interest, and that said segregated account . . . continue to accumulate Interest at a rate equivalent to a one-year Certificate of Deposit.” These two requirements’ opaqueness makes it understandable that Matassarin might question the treatment of her account. We seek here to provide clarification. Matassarin contends that she is entitled to more than the simple interest that will accumulate on her segregated shares’ cash value as of the last valuation date before the segregation. She contends that she should receive the cash value of 520.086 shares at whatever time the Plan passes the benefits to her. We -24- disagree. The ESOP defines the “valuation date” as the December 31 “coinciding with or immediately preceding the date of actual distribution of Plan Benefits.” Matassarin states that because the Plan has not made a distribution to her, the administrator erred by valuing her shares as of the divorce date. The QDRO, however, contravenes the interpretation that Matassarin urges. Necessarily reducing Matassarin’s interest to cash value is implicit in the QDRO, because cash principal can accumulate interest, whereas shares, owing to their fluctuating value, cannot. To read the QDRO as requiring Matassarin to receive the total of 520.086 shares valued at the date of payment to Matassarin would render meaningless the QDRO provision pertaining to interest. The Plan administrator instead valued Matassarin’s interest at the date of segregation--that is, distribution to her interest-accumulating segregated account. In light of the QDRO provisions, the Plan administrator’s interpretation was legally correct. Matassarin also argues that the Great Empire ESOP-- specifically, restated § 18(e)(1)--supports her position. Under that provision, the Plan administrator must segregate a QDRO beneficiary’s account and “continue to [treat it] in the same manner as the affected Accounts of the Participant,” albeit absent further contributions or forfeitures from Great Empire. The appellees argue that the restated Plan, although retroactive to 1989, should not apply to Matassarin’s QDRO, because at the -25- time that the QDRO was entered, the original Plan provisions were effective. The appellees’ reasoning is not self-evident, and one might plausibly argue that the 1994 restatement should indeed apply to Matassarin’s QDRO.14 That issue, however, is a matter of Plan interpretation, which we review under the abuse-ofdiscretion standard. No matter which interpretation this Court might prefer, the Plan administrator did not act arbitrarily and capriciously in finding that the provisions added to § 18(e)(1) in 1994 do not govern Matassarin’s QDRO.
Matassarin argues that she is currently entitled to distribution of her benefit, that beneficiaries under the ESOP may select distribution of benefits “in the form of employer securities,” and that beneficiaries have an option to “put” those securities back for fair market value. Matassarin argues that two tax code provisions--26 U.S.C. § 409(h)15 and 26 U.S.C. 14. In the original Plan § 19(a), Great Empire “reserve[d] the right to amend the Plan at any time and from time to time, in whole or in part, including without limitation, retroactive amendments . . . .” Matassarin became a Plan beneficiary on October 15, 1991, and remained so in 1994, when the Plan was restated. Section 1(b) of the 1994 restatement rendered the restatement’s provisions retroactive to January 1, 1989. The restatement does not except segregated accounts from retroactive application of its terms. Thus, at the time that Plan fiduciaries offered Matassarin a distribution in December 1994 or May 1995, they might have been able to treat Matassarin’s account--a “segregated account” as established under the Plan--as subject to the restated Plan. 15. That statute provides, in part: A plan meets the requirements of this subsection -26- § 4975(e)(7)16--mandate these beneficiary options in a tax-exempt plan such as the Great Empire ESOP. Matassarin is correct that, under those provisions, ESOP participants who are entitled to distribution must be able to demand employer securities as the form of distribution. She is, however, mistaken to contend that she is now entitled to a distribution. Although the QDRO fails to specify the date of distribution, § 18(e)(4) in both the original and the restated Plan provides that no distributions need be made to Matassarin before Jenkins reaches retirement eligibility. The Retirement Equity Act recognizes that a QDRO may delay distribution until the Plan participant could retire. See 29 U.S.C. § 1056(d)(3)(E)(i). We see no reason why an ERISAqualified plan may not do the same. Matassarin’s domestic relations order met the Plan’s § 18(e) qualifications. The Plan administrator interpreted the QDRO requirements and harmonized them with the Plan provisions. We find no error in the Plan administrator’s interpretation of the if a participant who is entitled to a distribution from the plan—(A) has a right to demand that his benefits be distributed in the form of employer securities, and (B) if the employer securities are not readily tradable on an established market, has a right to require that the employer repurchase employer securities under a fair valuation formula. 26 U.S.C. § 409(h)(1). 16. “A plan shall not be treated as an employee stock ownership plan unless it meets the requirements of section 409(h) . . . .” 26 U.S.C. § 4975(e)(7). -27- QDRO and no abuse of discretion in its interpretation of the Plan provisions. Accordingly, we affirm the district court’s grant of summary judgment to the defendants on Matassarin’s ERISA claim for denial of benefits.