Opinion ID: 1584429
Heading Depth: 1
Heading Rank: 3

Heading: federal statutory background

Text: Since the sole issue in this appeal deals with the correctness of the chancellor's award to the wife of a percentage of the husband's vested profit sharing plan, a brief summary of the federal statutory scheme on this subject is in order. [3] The Employee Retirement Income Security Act of 1974, Pub.L. 93-406, 88 Stat. 829 (1974), commonly referred to as ERISA, was enacted by Congress to afford protection for the benefit of participants in qualified pension plans, profit sharing plans, or stock bonus plans. The tax provisions of ERISA are found at 26 U.S.C.A. §§ 401-420 (1986 & Supp. 1993) while the labor provisions (participation, vesting, funding, etc.) are found at 29 U.S.C.A. §§ 1001-1461 (1986 & Supp. 1993). The basic policy finding by Congress set forth in 29 U.S.C.A. § 1001 (1986) was: the growth in size, scope, and numbers of employee benefit plans in recent years has been rapid and substantial; that the operational scope and economic impact of such plans is increasingly interstate; that the continued well-being and security of millions of employees and their dependents are directly affected by these plans; that they are affected with a national public interest; that they have become an important factor affecting the stability of employment and the successful development of industrial relations; that they have become an important factor in commerce because of the interstate character of their activities, and the activities of their participants, and the employers, employee organizations, and other entities by which they are established or maintained; that a large volume of the activities of such plans is carried on by means of the mails and instrumentalities of interstate commerce; that owing to the lack of employee information and adequate safeguards concerning their operation, it is desirable in the interests of employees and their beneficiaries, and to provide for the general welfare and the free flow of commerce, that disclosure be made and safeguards be provided with respect to the establishment, operation, and administration of such plans. The need of federal legislation in this field is illuminated by the scope of pension plans. When ERISA was enacted in 1974, some [30 million] employees were covered by private pension plans with at least [175] million dollars in assets... . Pension plans constitute the largest block of private capital in the United States, and `represent the world's largest identifiable source of private wealth.' Gregory, 48 U.Pitt.L.Rev. 427, 435 (1987). ERISA preempted state authority in the regulation of private pension plans and related employment benefits, while it acknowledges some degree of state authority. The 1984 Retirement Equity Act (REA) provided this interaction between the federal and state authorities, in the area of domestic relations law. As originally enacted, ERISA provided that accrued pension benefits could not be assigned or alienated. Because of the preemptive effect of ERISA, this provision was interpreted as prohibiting state family courts from assigning pension benefits to a participant's spouse or children. This anti-alienation rule of ERISA gave rise to an implied family law exception in some courts, to permit state domestic relations courts the authority to assign pension benefits to a participant's spouse and/or children in a divorce action. A.T. & T. v. Merry, 592 F.2d 118, 121-23 (2nd Cir.1979); Senco, Inc. v. Clark, 473 F. Supp. 902, 907-08 (M.D.Fla. 1979). However, conflicting decisions began to arise in courts across the country. In order to bring uniformity to the various judicial positions taken, Congress enacted the Retirement Equity Act of 1984, Pub.L. No. 98-397, 98 Stat. 1426 (1984), now codified as REA. Among other changes, REA amended ERISA to permit a limited exception to the anti-alienation rule. REA recognized that the spouse of a participant has a financial interest in benefits provided under a plan [and] that this financial interest should not be subject to the dominion and control of the participant. M. Wilf, S. Simmons, W. Lieber, J. Lindquist, I. Cohen, R. Blum, The REA Book, I-1, (1991). The amendment permitted state domestic relations courts to enter a Qualified Domestic Relations Order (QDRO) to assign to a spouse rights in the participant's pension plan. 26 U.S.C.A. § 414(p) (Supp. 1993); 29 U.S.C.A. § 1056(d)(3) (1985). (See appendix). Notwithstanding the preemptive effect of ERISA, the entitlement of an individual to an interest in a former spouse's pension benefits remains a matter to be determined under state domestic relations law; REA merely mandates the requirements for enforcement of such rights in an ERISA-covered pension plan. Thus, in the absence of a QDRO, a divorce and the settlement of all marital property rights extinguishes all enforceable rights of an individual against an ERISA-covered pension plan in which the individual's former spouse is participating. The requirements of a Qualified Domestic Relations Order are set forth in the statute. To become qualified, a court order, judgment, or decree must: (1) be made pursuant to state domestic relations law; (2) relate to the provision of child support, alimony or marital property rights to a spouse, former spouse, child, or other dependents of a plan participant; (3) create or recognize the existence of an alternate payee's (such as a spouse's, former spouse's, child's or their dependents') right to, or assign to an alternate payee, a portion of a participant's benefits under a plan; (4) contain certain information identifying the plan and how the alternate payee's portion is to be determined; and (5) not require a plan to provide a benefit not otherwise available nor require the payment of increased benefits nor may the order require the payment of benefits which are required to be paid under a previously issued QDRO. 26 U.S.C.A. § 414(p)(1)-(3) (Supp. 1993); 29 U.S.C.A. § 1056(d)(3) (Supp. 1993). The QDRO rules apply only to pension plans subject to ERISA and plans intended to be tax qualified under the Internal Revenue Code. 26 U.S.C.A. § 401; 29 U.S.C.A. §§ 1002(2)(A), 1003(a). Pension plans maintained by a tax-exempt employer, a government, or a church are subject to these rules. 26 U.S.C.A. § 414(p)(11); 29 U.S.C.A. § 1003(b). Plans intending to be tax qualified and maintained by private employers, such as pension, profit sharing and stock bonus plans, will be subject to these provisions. 26 U.S.C.A. §§ 401, 414(p). [4] With this broad overview of the interplay of federal and state law, let us now turn to the issue raised on appeal.