957 F.3d 1098
10th Cir.2020Background
- Decedent was a federal employee with a Thrift Savings Plan (TSP) account governed by FERSA; Betty Eileen Diamond was the named beneficiary.
- In a 2013 Utah divorce decree Diamond waived any interest in the Decedent’s retirement accounts; the TSP beneficiary designation, however, was not changed.
- Decedent died in 2017 and TSP funds were payable to Diamond under the beneficiary designation.
- The Estate sued Diamond in state court seeking a waiver/constructive trust on any TSP funds Diamond received; Diamond removed and moved to dismiss.
- The district court dismissed, holding the Estate’s state-law claims are preempted by FERSA; the Tenth Circuit affirmed, concluding FERSA’s order-of-precedence and anti-attachment provisions preempt post-distribution state claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether state-law claims to impose a constructive trust on TSP proceeds paid to a designated beneficiary are preempted by FERSA | Estate: constructive trust is a post-distribution remedy and does not interfere with federal distribution; FERSA’s rules are administrative only | Diamond: FERSA’s order-of-precedence and anti-attachment provisions ensure designated beneficiary receives proceeds free of competing state claims | Held: Preempted—post-distribution constructive-trust claims frustrate FERSA and are barred |
| Whether the presumption against preemption in family-law matters prevents federal preemption here | Estate: family-law presumption should protect divorce-property allocations | Diamond: federal statute expressly controls beneficiary payment and overrides conflicting state divorce decrees | Held: Presumption overcome—FERSA’s clear directive governs despite family-law context |
| Whether Kennedy (ERISA) allows a post-distribution state suit to recover benefits | Estate: Kennedy suggests post-distribution suits may be permitted for retirement plans | Diamond: Kennedy is distinguishable because ERISA lacks FERSA’s explicit order-of-precedence | Held: Kennedy inapplicable—FERSA’s order-of-precedence makes post-distribution suits preempted |
| Whether imposing a constructive trust on distributed funds is legally distinguishable from directing payment to the Estate | Estate: constructive trust targets funds after distribution rather than redirecting federal payment | Diamond: constructive trust is the economic equivalent of diverting proceeds from the designated beneficiary | Held: Court treats constructive trust as equivalent and preempted |
Key Cases Cited
- Wissner v. Wissner, 338 U.S. 655 (1950) (NSLIA: Congress’ beneficiary designation rule preempts state attempts to divert proceeds)
- Ridgway v. Ridgway, 454 U.S. 46 (1981) (SGLIA: order-of-precedence and anti-attachment preempt state constructive trusts on proceeds)
- Hillman v. Maretta, 569 U.S. 483 (2013) (FEGLIA: post-distribution state causes of action that displace designated beneficiary are preempted)
- Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285 (2009) (ERISA: administrator correctly paid designated beneficiary; Court left open possibility of post-distribution suit but did not address statutes with order-of-precedence)