Opinion ID: 791879
Heading Depth: 4
Heading Rank: 2

Heading: ERISA's Prohibition on the Alienation or Assignment of Benefits

Text: 27 Recognition of Rosemary's waiver in this case would also contravene ERISA's anti-alienation provision, 29 U.S.C. § 1056(d)(1). 5 McGowan argues that waiver is a distinct concept from assignment or alienation and that waiver is therefore not expressly prohibited by § 1056(d)(1). Cf. Altobelli, 77 F.3d at 81; Brandon, 18 F.3d at 1324; Fox Valley, 897 F.2d at 279. We agree as a general matter that waiver is not the same thing as assignment or alienation. Assignment or alienation involves an affirmative transfer of benefits to another person, whereas waiver usually involves only a refusal of benefits on the part of the individual slated to receive them. Cf. Fox Valley, 897 F.2d at 279. 28 That said, McGowan's argument on this point is similar to an argument rejected by the Supreme Court in Boggs. In that case, the Supreme Court reversed the Fifth Circuit's ruling that ERISA did not preempt a state law allowing a beneficiary to transfer her interests in her former spouse's pension plan by testamentary instrument. The court of appeals had addressed whether the testamentary transfer was prohibited by § 1056(d)(1) and attempted to distinguish that transfer from an assignment or alienation: 29 [Section 1056(d)(1)] was not intended to affect support obligations among the members of a family. Furthermore, a non-participant spouse's ownership of an interest in the participant spouse's retirement benefits involves neither an alienation nor an assignment. Under community property law, ownership vests immediately in the non-earning spouse, and no transaction is needed to convey ownership. Thus, no transaction prohibited by the ERISA spendthrift provision has occurred. 30 Boggs v. Boggs, 82 F.3d 90, 97 (5th Cir.1996), rev'd, 520 U.S. 833, 117 S.Ct. 1754, 138 L.Ed.2d 45. 31 The Supreme Court disagreed, stating that the testamentary transfer at issue was indeed prohibited under § 1056(d)(1), as it fell within the regulatory definition of assignment or alienation. Boggs, 520 U.S. at 851, 117 S.Ct. 1754 (quoting 26 C.F.R. § 1.401(a)-13(c)(1)(ii)). The regulation defines assignment or alienation as [a]ny direct or indirect arrangement . . . whereby a party acquires from a participant or beneficiary a right or interest enforceable against the plan in, or to, all or any part of a plan benefit payment which is, or may become, payable to the participant or beneficiary. 26 C.F.R. § 1.401(a)-13(c)(1)(ii) (emphasis added). Boggs thus demonstrates that actions which may be semantically distinguishable from assignment or alienation may nevertheless be prohibited by § 1056(d)(1). 32 Similarly, although the common definitions of waiver and assignment may diverge, McGowan seeks to use the concept of waiver in order to effectuate what is the functional equivalent of an assignment of benefits from his former wife to his current wife. 6 As Judge Easterbrook pointed out in his dissenting opinion in Fox Valley, a waiver in the ERISA context is not merely a refusal of benefits, but also functions as an anticipatory gift, to whoever is next in line under the [Plan's] rules[.] 897 F.2d at 282-83 (Easterbrook, J., dissenting). Rosemary's waiver here, if recognized, creates an indirect arrangement whereby the Plan benefits are transferred to Donna, who in turn gains an interest enforceable against the plan. These actions therefore fit within the definition of assignment or alienation provided in 26 C.F.R. § 1.401(a)-13(c)(1)(ii). Thus, even though ERISA does not expressly state that waivers are prohibited, recognition of the waiver sought in this case would undermine § 1056(d)(1). 33 Finally, it is worth noting that any concern for the ability of individuals to freely and voluntarily relinquish certain rights in their former spouses' ERISA plan benefits upon divorce has already been addressed by Congress through the passage of the QDRO provision in 1984. The Supreme Court in Boggs emphasized the care with which Congress created the QDRO mechanism in order to give enhanced protection to the spouse and dependent children in the event of divorce or separation[.] Boggs, 520 U.S. at 847, 117 S.Ct. 1754. The Court also made clear that the QDRO exception to § 1056(d)(1) is to be narrowly construed and is not subject to judicial expansion. Id. at 851, 117 S.Ct. 1754. As such, recognition of additional methods of dispersing ERISA benefits in the event of a divorce would be inconsistent with this comprehensive scheme. 34 The surviving spouse annuity and QDRO provisions, which acknowledge and protect specific pension plan community property interests, give rise to the strong implication that other community property claims are not consistent with the statutory scheme. 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. 35 Id. at 847-48, 117 S.Ct. 1754 (emphasis added) (citing Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 147-48, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985)). 36 Applying this 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 recognizes the right to designate alternate payees under certain circumstances, 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, Id. 37 In sum, McGowan was required to satisfy the very specific requirements of § 1056(d)(3) in order to change beneficiaries, and he has provided no reason why he could not have obtained a QDRO from the Florida state courts effectuating Rosemary's intent to be removed as the beneficiary under the Plan at the time of the divorce. He should not now be able to circumvent the requirements of § 1056(d)(3), as well as the requirements of § 1104(a)(1)(D), by couching this change of beneficiaries in waiver terms. 38