METROPOLITAN LIFE INSURANCE COMPANY, Plaintiff, v. Rose Marie WHEATON, Defendant-Appellant, and Douglas Wheaton and Daniel Wheaton, Defendants-Appellees.
No. 94-1362.
United States Court of Appeals, Seventh Circuit.
Argued Sept. 13, 1994. Decided Dec. 14, 1994.
42 F.3d 1080
Joseph J. Welcenbach (argued), Welcenbach & Widmann, Richard W. Double, Double & Double, Milwaukee, WI, for defendants-appellees.
Before POSNER, Chief Judge, MANION, Circuit Judge, and ASPEN, District Judge.*
POSNER, Chief Judge.
This appeal presents questions of statutory interpretation in the context of a divorce decree that seeks to regulate the distribution of benefits under an ERISA welfare (as distinct from pension) plan. Frank Wheaton was a participant in the General Electric Employеe Welfare Plan. One of the benefits provided by the plan was group life insurance. Wheaton and his wife divorced, and a stipulation incorporated in the divorce decree required both parties to “maintain ... the life insurance which is presently carried through his/her employer with the children of the parties named as sole and irrevocable primary beneficiaries until the youngest minor child reaches the age of majоrity or until such child has reached the age of nineteen (19) so long as the child is pursuing an accredited course of instruction leading to the acquisition of a high school diploma or equivalent.” The Wheatons had two children, boys aged 15 and 17 on the date of the decree. Shortly after the decree took effect Wheaton remarried and named his new wife
ERISA states that its provisions “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.”
The section from which we have been quoting,
There is a logically prior issue—whether if the Retirement Equity Act is inapplicable to welfare plans, as the widow contends, a provision in a divorce decree specifying the beneficiary of an employee‘s interest in an ERISA welfare plan simply is outside the scope of ERISA‘s preemption clause. We think it important to flag the issue; though neither party has raised it, it is sure to recur.
The draftsmen of the Retirement Equity Act took pains to forbid expressly, though with some exceptions, the alienation or assignment of pension plan benefits, including alienation or assignment by a divorce decree. This would not have been necessary had it been clear that ERISA‘s general preemption clause (
Before that Act was passed, we had held that ERISA did not preempt state domestic relations law. Savings & Profit Sharing Fund v. Gago, 717 F.2d 1038 (7th Cir. 1983). We were not alone in this view, see Operating Engineers’ Local #428 Pension Trust Fund v. Zamborsky, 650 F.2d 196 (9th Cir.1981), but there were cases opposed (see discussion in Fox Valley & Vicinity Construction Workers Pension Fund v. Brown, 897 F.2d 275, 278-79 (7th Cir.1990) (en banc); Herberger v. Shanbaum, 897 F.2d 801, 804 (5th Cir.1990); S.Rep. No. 575, 98th Cong.,
The widow is trying to walk a fine line. The anti-alienation provision added by the Retirement Equity Act is, by its terms, applicable only to pension plans; and every court to consider the issue has limited its scope accordingly. Nichol v. Pullman Standard, Inc., 889 F.2d 115, 119-21 (7th Cir.1989); Anweiler v. American Electric Power, Service Corp., 3 F.3d 986, 994 (7th Cir.1993); United States v. International Brotherhood of Teamsters, 941 F.2d 1292, 1298 (2d Cir. 1991); Misic v. Building Service Employees Health & Welfare Trust, 789 F.2d 1374, 1376-77 (9th Cir.1986) (per curiam). She is relying on the general preemption provision of ERISA to knock out all but qualified domestic relations orders and seeking to confine the exception for qualified domestic relations orders to those orders that affect interests in pension plans, in order to prevent the divorce stipulation in the present case from being enforced. We think this attempt must fail even if (an issue we need not decide, and ought not since it was not raised by the parties) the general preemption provision has, contrary to cases like Gago that preceded the Retirement Equity Act, the broad scope that she ascribes to that provision.
The primary concern of the draftsmen of the Retirement Equity Act was, it is true, with retirement, and hence with the pension provisions of ERISA. (In addition to the conspicuous textual clues noted earlier, see S.Rep. No. 575, supra.) Nevertheless the definition of qualified domestic relations orders is not limited to orders that affect pension plans. It applies to all plan participants. What is more, the exemption of such orders from the preemptive sweep of ERISA appears not in the section of the statute that defines those orders and prescribes the conditions for effectuating and enforcing them (
We are not slaves to literalism, but we cannot understand why, if a qualified domestic relations order can override the designation of beneficiary in a pension plan, as Congress in the Retirement Equity Act decided that it can, Congress would not have allowed such an order to override the designation of beneficiary in a welfare plan. The drаftsmen of the Retirement Equity Act were concerned with the financial security of the spouses and other survivors of employees who died enrolled in ERISA plans. S.Rep. No. 575, supra, at 12, U.S.Code Cong. & Admin.News 1984 at 2558; Hurwitz v. Sher, 982 F.2d 778, 781 (2d Cir.1992). That does not by itself point us to a unique solution in the present case, where we have a spouse (albeit a very recent one) on one side and children on the other. But it does suggest that to distinguish between pension benefits and life insurance proceeds so fаr as the validity of domestic relations orders is concerned would be arbitrary. The employee‘s life insurance will often be as important to the survivors as his pension benefits. And since the alienation of pension benefits is more momentous to the average pensioner, because it may take effect before his death, than changing the pocket in which the proceeds of his life insurance will end up after his death, it would be odd if it were easier to
We conclude that the literal reading of ERISA as amended by the Retirement Equity Act, a reading that establishes an exception to preemption for qualified domestic relations orders pertaining to all ERISA plans, not just pension plans, makes more practical sense than a flexible reading that gives weight to the history of the provision and to the fact that the provisions that surround the definition of qualified domestic relations orders, including the anti-alienation provision, are limited to pension plans, though the definition is not. We shall go with the literal reading, and so turn now to the widow‘s back-up argument, which is that the divorce stipulation does not contain all the information required by the statute for a qualified domestic relations order. It does not give the boys’ address, name the plans to which it applies, or specify the percentage division between the designated beneficiaries (the Wheatons’ children). All these things must be “clearly specif[ied]” for a domestic relations order (whiсh the stipulation, incorporated as it was in the divorce decree, plainly is) to qualify for the statutory exception. The statutory language is explicit and emphatic. The purpose is to reduce the expense of ERISA plans by sparing plan administrators the grief they experience when because of uncertainty concerning the identity of the beneficiary they pay the wrong person, or arguably the wrong person, and are sued by a rival claimant. Id. at 782; Carland v. Metropolitan Life Ins. Co., 935 F.2d 1114, 1120 (10th Cir.1991); cf. Hartmann v. Prudential Ins. Co., 9 F.3d 1207 (7th Cir.1993).
The matter of addresses is no problem. At the time of the decree the Wheaton children were children. They lived with their parents (who were given joint custody by the decree), so the children‘s address was the parents’ addresses, and those addresses were stated in the decree. The failure to name the plan is a little more troublesome. But the stipulation does specify “the life insurance which is prеsently carried through his/her employer,” and this designation permits the identification of the plans to which the decree applies without significant ambiguity. Any life insurance provided under an employer‘s policy at the time of the stipulation is covered.
The difficult question involves the requirement that the division of the proceeds among the alternate payees be clearly specified, either by specific percentage or by a formula from which the percentages can be calculated. When Mr. Wheaton died, his elder son had already graduated from high school. Could the younger son argue that he should get the entire $60,000, since the purpose of the provision requiring the parents to designate their children as the sole beneficiaries of their life insurance seems to have been to make sure the children were adequately supported through high school, after which they could go to work and support themselves, or attend college with the aid of scholarships or loans? No doubt the more plausible interpretation is that the boys are to split the proceeds of the insurance 50-50. But the stipulation does not say this. Therefore, the widow argues, it does not “clearly specify” the division among the alternate payees.
There is force to this argument, but we believe that on balance it is unsound. The requirement of clear specification is designed to spare the plan administrator from litigation-fomenting ambiguities as to who the beneficiaries designated by the divorce decree are. We do not believe that Metropolitan Life Insurance Company faced any such risk here. If it had, we imagine we would have heard from it, but having interpleaded the contestants it ceased to play аny role in
But the insurance company would be safe in cutting a check for 50 percent of the proceeds to each boy, because it is clear that this is how the divorce decree allocates the proceeds. The provisions in a life insurance contract that relate to beneficiaries are construed in accordance with the law of wills, American Foundation Life Ins. Co. v. Wampler, 254 Ark. 983, 497 S.W.2d 656, 658 (1973); 5 Couch on Insurance § 28:7, p. 14 (2d ed. 1984); the stipulation regarding Mr. Wheaton‘s life insurance was in effect a provision of an insurance contract regarding beneficiaries; and the Wisconsin law of wills and estates presumes equal distribution in cases where no other distribution is specified in the will itself or in an applicable statute. See
So the plan administrator was not forced to run a significant risk by the failure of the stipulation to specify the division between the boys. The domestic relations order was therefore specific enough to serve ERISA‘s purposes. To require more specificity would defeat the purpose of the provision creating an exception to inalienability for qualified domestic relations orders, at least in the present case, and for a purely theoretical gain in certainty. It is asking too much of domestic relations lawyers and judges to expect them to dot every i and cross every t in formulating divorce decrees that have ERISA implications. Ideally, every domestic relations lawyer should be cоnversant with ERISA, but it is unrealistic to expect all of them to be. We do not think Congress meant to ask the impossible, not the literally, but the humanly, impossible, or to make a suit for legal malpractice the sole recourse of an ERISA beneficiary harmed by a lawyer‘s failure to navigate the treacherous shoals with which the modern state-federal law of employee benefits abounds.
AFFIRMED.
MANION, Circuit Judge, concurring in the judgment.
I agree with the court‘s judgment that Daniel and Douglas Wheаton should receive their father‘s life insurance proceeds pursuant to the state divorce decree. However, this need not be a complicated analysis resolving perceived arbitrary distinctions between the assignability of pension plans versus welfare plan benefits via a QDRO. Nor, for that matter, is it even necessary to determine whether this divorce decree is a QDRO. Instead, if an assignment of welfare plan benefits is not governed by ERISA at all, the inquiry ends.
The court apparently assumes as a necessary premise to its analysis that the general preemption provision of ERISA,
Instead, the chief concern in Mackey was whether ERISA preempted the application of a state‘s general garnishment procedure to ERISA welfare plan benefits (in that case, accrued vacation benefits). The trustees of the plan raised an argument similar to that presumed by this court, that ERISA‘s preemption provision trumps state laws that attempt to assign (technically, garnish, but the effect is the same) welfare plan benefits. The Supreme Court rejected this argument. First, the Court observed that ERISA‘s preemption provision “deals with state laws as they relate to plans,” id. at 836, 108 S.Ct. at 2189 (emphasis in original), whereas the anti-alienation provision aрplies only to benefits, specifically, those of pension and not welfare plans. Id. at 836, 108 S.Ct. at 2189; see also Guidry v. Sheet Metal Workers Nat‘l Pension Fund, 39 F.3d 1078, 1085-86 (10th Cir. 1994) (en banc) (same). This was an important distinction, for to read the preemption provision as barring state laws that affect both plan benefits and plans would essentially render the anti-alienation clause of
In a comprehensive regulatory scheme like ERISA, such omissions are significant ones. Once Congress was sufficiently aware of the prospect that ERISA plan benefits could be attached and/or garnished—as evidenced by its adoption of [§ 1056(d)(1)]—Congress’ failure to expressly bar the state-law alienation of welfare plan benefits meant that Congress’ decision to remain silent concerning [alienation] of ERISA wеlfare plan benefits “acknowledged and accepted the practice, rather than prohibiting it.”
Id. 486 U.S. at 837, 108 S.Ct. at 2189 (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 516, 101 S.Ct. 1895, 1902-03, 68 L.Ed.2d 402 (1981)). From this, the Court concluded that “Congress did not intend to preclude state-law attachment of ERISA welfare plan benefits.” Id. 486 U.S. at 838, 108 S.Ct. at 2190.
Moreover, the Court addressed the trustees’ back-up argument (also alluded to by this court). The trustees claimed that the 1984 Retirement Equity Act amendments to ERISA demonstrated that Congress thought that ERISA‘s preemption provision, as originally enacted, generally preempted all state law assignments and alienations, pension and welfare plans alike. The Court, however, did not accept this proposed theory that was supposedly the driving force behind the 1984 amendments:
There is, however, another plausible construction of Congress’ action in 1984, namely, that Congress thought that some courts had erroneously construed [§ 1144(a)] as pre-empting such orders. In this view, the 1984 amendment served the purpose of correcting the error thus clarifying the original meaning of the section. Moreover, even if the United States is correct, and Congress in 1984 thought that [§ 1144(a)] as originally enacted preempted domestic relations orders directed at ERISA plans—and other state-law attachments and garnishments as well—the opinion of this later Congress as to the meaning of a law enacted 10 years еarlier does not control the issue.
Id. 486 U.S. at 839, 108 S.Ct. at 2190-91 (footnotes omitted) (citations omitted).
Clearly, then, ERISA preemption does not reach as far as the assignment of welfare plan benefits. This is made all the more important when we consider what is at stake here. Rose Marie Wheaton is launching this appeal in an attempt to undermine a provision of a state divorce decree. However, the
RICHARD A. POSNER
CHIEF JUDGE