Lead Opinion
Yale-New Haven Hospital brought this interpleader action pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., to resolve competing claims by Barbara Nicholls and Claire Nicholls to certain funds held in the four retirement and pension plans of the late Harold Nicholls. Barbara Nicholls, the surviving spouse of Mr. Nicholls, argues that the funds are payable to her because she is the named beneficiary in the plan documents. Claire Nicholls, the former spouse of Mr. Nic-holls, contends that a portion of those funds are instead payable to her. She argues that three state court orders — her divorce settlement' agreement and two nunc pro tunc orders entered after Mr. Nicholls’s death — constitute qualified domestic relations orders (“QDROs”) within the meaning of ERISA and thus validly assign those funds to her.- The District Court granted summary judgment in favor of Claire Nicholls on the ground that the divorce settlement agreement constitutes a QDRO applicable to all four retirement plans.
We find that the divorce settlement agreement does not constitute a QDRO because the agreement fails to comply with the requirements of 29 U.S.C. § 1056(d)(3)(C). We conclude, however, that the nunc pro tunc orders constitute valid QDROs that assign funds to Claire Nicholls from the three retirement and pension plans named in the orders. But because the nunc pro tunc orders do not clearly specify the fourth plan, we conclude that the orders do not assign funds from that plan to Claire Nicholls. We therefore affirm the judgment of the District Court with respect to the three plans specified in the nunc pro tunc orders, and reverse the judgment as to the fourth plan.
BACKGROUND
At issue here is whether the domestic relations orders identified by Claire Nic-holls constitute “qualified domestic relations orders” within the meaning of ERISA. Unless they are QDROs, the orders cannot compel the transfer of funds from Mr. Nicholls’s retirement and pension plans to Claire Nicholls. Generally, ERISA precludes the assignment or alienation of benefits under covered plans, 29 U.S.C. § 1056(d)(1), and preempts state laws that “relate to” employee benefits plans, id. § 1144(a). However, ERISA’s anti-assignment and -alienation provisions do not apply to, and ERISA does not preempt, “qualified domestic relations orders.” Id. §§ 1056(d)(3)(A), 1144(b)(7); see also Boggs v. Boggs,
The exception of QDROs from ERISA’s alienation and preemption provisions was a product of the Retirement Equity Act of 1984 (“REA”), which took effect for relevant purposes on January 1, 1985. See Pub.L. No, 98-397, 98 Stat. 1426 (1984). Prior to the REA, ERISA had the unintended effect of “disturbing interests and expectations” in state-court matrimonial disputes, in which employment benefits were commonly at issue. Metro. Life Ins. Co. v. Bigelow,
The REA defines a QDRO as a domestic relations order that “creates or recognizes the existence of an alternate payee’s right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan....”
(C) A domestic relations order meets the requirements of this subparagraph only if such order clearly specifies—
(i)the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order,
(ii) the amount or percentage of the participant’s benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined,
(iii) the number of payments or period to which such order applies, and
(iv) each plan to which such order applies.
Id. § 1056(d)(3)(C).
B. Harold Nicholls and Claire Nic-holls’s Divorce and Settlement Agreement
On September 5, 2008, the Connecticut Superior Court for the Judicial District of New Haven divorced Harold Nicholls and Claire Nicholls by entering a Judgment for Dissolution of Marriage. A “Settlement Agreement/Stipulation To Judgment” (“Settlement Agreement”), also dated September 5, 2008, was incorporated by reference into the Judgment for Dissolution of Marriage.
The Settlement Agreement provided, inter alia, that: “The Husband shall transfer to the wife one half of that portion of his . PENSION and RETIREMENT ACCOUNTS, which were accumulated during the marriage. This will include the marital portion of annual deposit, if any, for the year 2008, which has not yet been made.” App’x at 26 ¶ 16.2. The Settlement Agreement also provided that:
Since the division,of [the pension and retirement plans] is as of the date of the final decree for dissolution of marriage, the wife shall share, in proportion to her ownership' interest in the asset, in all earnings, gains, losses, appreciation,and/or depreciation, due to market activity from the date of the final decree for dissolution of marriage to the date of the actual assignment and transfer.
Id. at 26 ¶ 16.2(B).
The Settlement Agreement further provided that:
The parties agree that the Court granting the dissolution of their marriage shall retain jurisdiction to amend the aforesaid orders regarding the assignment and transfers to the wife from said retirement plans or retirement accounts for the purposes of establishing or maintaining a Qualified Domestic Relations Order under the Retirement Equity Act of 1984 acceptable to plan administrators and with provisions which carry out the intent of the division of the parties’ retirement assets.
Id. at 27 ¶ 16.6. No funds were transferred from Mr. Nicholls’s pension and retirement plans to Claire Nicholls during his lifetime.
C.Mr. Nicholls’s Remarriage and Death
In 2009, Mr. Nicholls married Barbara Nicholls. Mr. Nicholls died on February 11, 2012. At the time of his death, Mr. Nicholls was a participant in four retirement and pension plans: (1) the Yale-New Haven Hospital Cash Account Pension Plan (“CAP Plan”), (2) the Yale-New Haven Hospital Matching Tax Shelter Annuity Plan (“Matching Plan”), (3) the Yale-New Haven Hospital Section 403(b) Tax-Sheltered Annuity Plan (“403(b) Plan”), and (4) the Yale-New Haven Hospital and Tax-Exempt Affiliates 457 Non-Qualified Deferred Compensation Plan (“457 Plan”). Barbara Nicholls was the named beneficiary of each of these plans.
D. The Posthumous Domestic Relations Orders,
On June 18 and August 1, 2012, Judge Bernadette Conway of the Connecticut Superior Court for the Judicial District of New Haven signed two nunc pro tunc
E. Procedural History
The plan administrator, Yale-New Haven Hospital, received competing claims from Barbara Nicholls and Claire Nicholls for certain funds in the three retirement and pension plans specified in the nunc pro tunc orders, as well as the fourth plan not specified therein. To resolve those claims, the plan administrator filed an in-terpleader complaint in the U.S. District Court for the District of Connecticut.
The District Court granted summary judgment in favor of Claire Nicholls and denied Barbara Nicholls’s motion for summary judgment. In so ordering, the District Court found the September 5, 2008 dissolution of marriage judgment “to be a qualified domestic relations order in that it substantially complies with 29 U.S.C. § 1056(d)(3)(B)(i).” Yale-New Haven
This timely appeal followed.
DISCUSSION
Barbara Nicholls raises two arguments on appeal. We agree -with her first argument, but reject her second. First, Barbara Nicholls asserts that the divorce settlement agreement between Claire Nicholls and Mr. Nicholls does not constitute a QDRO because it fails to fully comply with the requirements of 29 U.S.C. § 1056(d)(3)(C). Claire Nicholls, relying on our holding in Metropolitan Life Insurance Co. v. Bigelow,
Second, Barbara Nicholls argues that the two nunc pro tunc orders do not constitute valid QDROs because they were entered after the death of Mr. Nicholls, However, Congress has made clear that domestic relations orders are not invalid simply because they were entered after the death of the plan participant. We therefore hold that the nunc pro tunc orders are qualified domestic relations orders within the meaning of ERISA.
I. The Settlement Agreement does not constitute a QDRO.
The Settlement Agreement does not constitute a QDRO because it fails to satisfy the requirements of 29 U.S.C. § 1056(d). In particular, the agreement does not “clearly specif[y]” (1) a mailing address for either Claire Nicholls or Mr. Nicholls, see 29 U.S.C. § 1056(d)(3)(C)(i), or (2) the plans to which it applies, see id. § 1056(d)(3)(C)(iv).
Although the Settlement Agreement fails to meet the statutory requirements for QDROs, the District Court held, and Claire Nicholls argues on appeal, that the Settlement Agreement nevertheless constitutes a QDRO because it “substantially complies” with ERISA’s requirements. In holding that “substantial compliance” with the REA’s QDRO provisions was sufficient to effect an assignment of plan benefits, the District Court relied on our holding in Bigelow. See Nicholls,
Bigelow involved a settlement agreement that, like the one at issue in this case, failed to specify the mailing addresses of the participant and alternate payees.
The settlement agreement at issue in Bigelow, however, was entered into in 1983, two years before the REA’s strict QDRO provisions took effect. .See id. at 442-43. Recognizing that many pre-REA divorce settlements and decrees ran afoul of the specificity requirements for QDROs set forth in the statute, Congress expressly provided that plan administrators could treat domestic relations orders entered before January 1,1985 “as a qualified domestic relations order even if such order does not meet the requirements” for a QDRO. Pub.L. No. 98-397, § 303(d), 98 Stat. 1426 (1984). Relying on this exception, we “join[ed] the Sixth Circuit in holding that ERISA does not require ‘literal compliance’ with respect to domestic relations orders entered prior to January 1, 1985.” Bigelow,
Bigelow’s substantial compliance rule does not apply to post-1984 domestic relations orders like the one at issue here. The QDRO exception created by the REA unambiguously states that “[a] domestic relations order meets the requirements of this subparagraph only if such order clearly specifies ” the information identified in subsections (i)-(iv). 29 U.S.C. § 1056(d)(3)(C) (emphases added). The “substantial compliance” rule is therefore in tension with Congress’s clear mandate. Although Congress counseled leniency for noncompliant domestic relations orders entered before the enactment of the QDRO exception, no such basis exists for excluding post-enactment orders from the REA’s explicit requirements.
We therefore follow the clear intent of Congress in holding that the substantial compliance rule announced in Bigelow does not apply to domestic relations orders issued after January 1, 1985. See Hawkins v. Comm’r of Internal Revenue,
II. The two nunc pro tunc orders are valid QDROs.
Although the Settlement Agreement cannot function as a QDRO, the two nunc pro tunc orders are in fact QDROs, and they provide an independent basis to affirm as to the three plans named therein— the CAP Plan, the Matching Plan, and the 403(b) Plan. However, because a QDRO must “clearly specif[y] ... each plan to which such order applies,” 29 U.S.C. § 1056(d)(3)(C), we must reverse as to the plan, not named in either nunc pro tunc order — the 457 Plan.
Barbara Nicholls does not dispute that the nunc pro tunc orders satisfy the requirements of 29 U.S.C. § 1056(d) with respect to the three named plans; rather, she argues that the orders are invalid because they were entered after Mr. Nic-holls’s death.
Domestic relations orders entered after the death of the plan participant can be QDROs. In the Pension Protection Act of 2006, Congress made clear that a QDRO will not fail solely because of the time at which it is issued, see Pub.L. No. 109-280, § 1001, 120 Stat. 780 (2006), although several of our sister circuits had already reached that conclusion, see, e.g., Files v. ExxonMobil Pension Plan,
a domestic relations order otherwise meeting the requirements to be a qualified domestic relations order ... shall not fail to be treated as a qualified domestic relations order solely because—
(A) the order is issued after, or revises, another domestic relations order or qualified domestic relations order; or
(B) of the time at which it is issued [.]
Pub.L. No. 109-280, § 1001 (emphasis added). The Department of Labor subsequently codified Congress’s intent, and issued regulations providing that “a domestic relations order shall not fail to be treated as a qualified domestic relations prder solely because of the time at which it is issued.” 29 C.F.R. § 2530.206. The regulations provide the following example of the rule’s application, entitled “Orders issued after death”:
Participant and Spouse divorce, and the administrator of Participant’s plan receives a domestic relations order, but the administrator finds the order deficient and determines that it is not a QDRO. Shortly thereafter, Participant dies while actively employed. A second domestic relations order correcting the defects in the first order is subsequently submitted to the plan. The second order does not fail to be treated as a QDRO solely because it is issued after the death of the Participant. The result would be the same even if no order had been issued before the Participant’s death, in other words, the order issued after death were the only order.
Id. It is therefore clear that the posthumous nature of the two nunc pro tunc orders does not affect their validity.
The dissent suggests that the posthumous orders could not have properly assigned plan benefits to Claire Nicholls because those benefits had already vested in Barbara Nicholls at the time of Mr. Nicholls’s death. See Dissent at 91-96. However, this concern is unwarranted for two. reasons.
First, the purpose of a nunc pro tunc order is to render that order effective as of a previous date. See In re World Trade Ctr.,
During any period in which the issue of whether a domestic relations order is a qualified domestic relations order is being determined (by the plan administrator, by a court of competent jurisdiction, or otherwise), the plan administrator shall separately account for the amounts ... which would have been payable to the alternate payee during such period if the order had been determined to be a qualified domestic relations order.
Id. § 1056(d)(3)(H)(i); see also Files,
The nunc pro tunc orders properly assign funds from the three plans named in the orders — the CAP Plan, the Matching Plan, and the 403(b) Plan — to Claire Nic-holls. However, the orders have no such effect with respect to the 457 Plan, which is not specified in either order. See 29 U.S.C. § 1056(d)(3)(C)(iv).
CONCLUSION
We AFFIRM in part and REVERSE in part the judgment of the District Court. Specifically, we affirm as to the three plans named in the nunc pro tunc orders and reverse with respect to the fourth plan, which is not named in the nunc pro tunc orders. The case is REMANDED with directions to enter judgment accordingly.
Notes
. “The term ‘alternate payee’ means any spouse, former spouse, child, or other dependent of a participant who is recognized by a domestic relations order as having a right to receive all, or a portion of, the benefits payable under a plan with respect to such participant.” 29 U.S.C. § 1056(d)(3)(K).
. “Nunc pro tunc, Latin for 'now for then,’ refers to a court’s inherent power to enter an order having retroactive effect.” In re World Trade Ctr. Lower Manhattan Disaster Site Litig.,
. To the extent that certain of our sister circuits have found post-1984 domestic relations orders to constitute QDROs without satisfying the clear requirements of 29 U.S.C. § 1056(d)(3)(C), see Stewart v. Thorpe Holding Co. Profit Sharing Plan,
. The dissent suggests that nunc. pro tunc QDROs may permit "federal time travel at the stroke of a state judge’s pen.” Dissent at 92. We respectfully disagree. See Samaroo v. Samaroo,
. ERISA provides that, if a QDRO determination is not made within the eighteen-month period discussed above, the plan administrator must pay the person "who would have been entitled to such amounts if there had been no order.” 29 U.S.C. § 1056(d)(3)(H)(iii)(II). If the order is determined to be a QDRO after that eighteen-month period, the payments to the alternate payee are to be made prospectively. Id. § 1056(d)(3)(H)(iv).
. The dissent suggests that Tise is distinguishable because — unlike this case — "the plan administrator was placed on notice of the alternate payee's state DRO-created interest ... before the participant's death.” Dissent at 95. However, the Department of Labor has expressly rejected this argument: "A number of commenters were concerned that Example (1) ... could be interpreted as requiring a plan fiduciary to reject a posthumous order if the plan fiduciary was not given notice of that order before the death of the participant. The Department does not agree with that interpretation of the example.... Nothing in the example should be construed as a requirement under section 206 of ERISA that an otherwise valid posthumous order fails to be a QDRO merely because the plan was not put on notice of the order while the participant was alive.” Final Rule Relating to Time and Order of Issuance of Domestic Relations Orders, 75 Fed.Reg. 32,846, 32,848 (June 10, 2010) (to be codified at 29 C.F.R. pt. 2530).
. The dissent cites to “numerous courts” that have concluded — in the dissent's view — that "spouse benefits vest in the participant’s spouse at the time of the participant’s retirement or preretirement death.” Dissent at 93. However, we see three problems with the authorities offered by the dissent. First, those cases are in tension with ERISA procedures which protect the potential interest of an alternate payee in plan funds even after the start date of an annuity. See, e.g., 29 U.S.C. § 1056(d)(3)(H). Second, the dissent's cases address only the distribution of annuity benefits and do not involve qualified preretirement survivor annuity benefits, which appear to be the type of annuity benefits at issue in this case. See Dissent at 90. Third, two of the three court of appeals cases on which the dissent relies—Rivers v. Central & South West Corp.,
. The dissent faults us for not deciding whether the two nunc pro tunc orders "trigger reannuitization of [Mr. Nicholls’s] plan annuity benefits,” Dissent at 97, and tentatively concludes that the orders “appear to violate surviving spouse annuity benefit regulations,” id. at 96. Because Barbara Nicholls does not rely upon these regulations or claim that the two nunc pro tunc orders will "trigger reannuitization,” we need not address these contentions. See United States v. Greer,
Concurrence in Part
concurring in part and dissenting in part:
I concur with the majority that the 2008 Settlement Agreement does not constitute a qualified domestic relations order (“QDRO”) both because it fails to satisfy the specificity requirements of 29 U.S.C. § 1056(d) and because it is not entitled to the substantial compliance rule announced in Metropolitan Life Insurance Co. v. Bigelow,
Discussion
I. Background
A. 2008 Settlement Agreement and 2012 State Court Nunc Pro Tunc Orders
The basic facts set forth by the majority are undisputed and need only be recounted here briefly. Harold and Claire Nicholls were married for more than twenty-one years until their divorce in 2008, at which point they entered into a Settlement Agreement. That agreement was incorporated into their dissolution of marriage judgment and provided, inter alia, that Harold’s pension and retirement accounts would be evenly divided between Harold and Claire. To accomplish this, the Settlement Agreement provided that Attorney Elizabeth McMahon would prepare a QDRO necessary to accomplish the assignment, but the QDRO envisioned by the Settlement Agreement was not prepared.
Harold then married' Barbara in 2009 and died a few years later in 2012 before having retired. Harold does not seem to have been a very likeable fellow. Claire’s Rule 56 statement in the District Court indicated that at the time of his death, Harold was in the throes of a divorce from Barbara and that he had failed to make good on other property division aspects of his Settlement Agreement with Claire. Claire also alleges that Harold did not cooperate with attempts to draft a QDRO.
At the time of his death, Harold was a participant in four retirement and pension plans, with Barbara designated as the sole beneficiary for each of the plans: (1) the Yale-New Haven Hospital Cash Account Pension Plan (“CAP Plan”); (2) the Yale-New Haven Hospital Matching Tax Shelter Annuity Plan (“Matching Plan”); (3) the Yale-New Haven Hospital Section 403(b) Tax-Sheltered Annuity Plan (“403(b) Plan”); and (4) the Yale-New Haven Hospital and Tax-Exempt Affiliates 457 Non-Qualified Deferred Compensation Plan (“457 Plan”).
After Harold’s death, Claire contacted Attorney McMahon to prepare a QDRO and the Connecticut Superior Court subsequently entered two posthumous QDROs — dated June 18 and August 1, 2012, but purporting to operate nunc pro tunc as of September 5, 2008, the dissolution of marriage judgment date — authorizing the plan administrator to distribute to Claire her portion of Harold’s plan benefits, as defined by the Settlement Agreement and the QDROs.
II. The Nunc Pro Tunc Orders Are Not Valid QDROs
The majority concludes that the two state court nunc pro tunc orders qualify as QDROs because they comply with ERISA Section 206’s specificity requirements, see 29 U.S.C. § 1056(d)(3)(C), and are not otherwise invalid. Specifically, the majority reasons (a) that posthumous domestic relations' orders (“DROs”) can serve as QDROs and (b) that the orders do not cause a reassignment of plan benefits because those benefits never vested in Barbara. See Majority Opinion (“Op.”) 85-88.
The majority is correct, of course, that posthumous DROs can serve as QDROs, but it nonetheless errs in giving retroactive effect to the instant nunc pro tunc orders for two reasons. As a threshold matter, the orders cannot serve as valid QDROs because they effect a reassignment of vested plan benefits from Barbara — Harold’s surviving spouse and sole designated beneficiary — to Claire, in contravention of ERISA’s statutory and regulatory scheme and underlying principles. Additionally, the orders fail as to at least two of the three plans in question because the orders contravene congressionally authorized regulations and interpretations thereof from the Department of Labor re--lating to surviving spouse annuity benefits.
A. The Pension Protection Act of 2006 and Its Regulations Do Not Support the Majority’s Position
Through its enactment of the Pension Protection Act of 2006, Pub.L. No. 109-280, § 1001, 120 Stat. 780 (2006) (“2006 Act”), Congress sought to provide domestic relations law practitioners clarity regarding the interplay between ERISA and marital property interests as asserted in QDROs. Congress directed the Secretary of Labor to issue regulations clarifying that a DRO otherwise meeting the requirements to be a QDRO would not fail to be treated as a QDRO (i) “solely because the order is issued after, or revises, another domestic relations order or qualified domestic relations order,” 29 C.F.R. § 2530.206(b)(1) (“Subsequent Domestic Relations Orders”), nor (ii) “solely because of the time at which [the domestic relations order] is issued,” id. § 2530.206(c)(1) (“Timing”). See Pub.L. No. 109-280, § 1001(1)(A)-(B).
The Department of Labor’s regulations were accompanied by a series of examples that illustrate that a second QDRO is not invalid solely because it follows a previous QDRO; rather, it is invalid only if, as a second QDRO, it purports to assign benefits already assigned to someone else. For instance, Subsequent Domestic Relations Orders Example 1 envisions a scenario in which the same participant and a now ■former-spouse secure a second QDRO either reducing or increasing benefits that the former spouse was to receive under a
Additionally, the regulation’s Timing examples illustrate several situations in which timing alone does not affect a QDRO’s validity. Example 1, relied upon by the majority, see Op. 86, explains that an order issued after the death of the participant is not invalid solely because it is issued posthumously. See 29 C.F.R. 2530.206(c)(2). So, for example, where a noncompliant (non-QDRO) DRO is submitted to the plan administrator but the participant dies before it is corrected, or even where no order at all is issued before the participant’s death, the QDRO is not invalid solely because it is issued after the participant’s death. Id.
Critically, however, nothing in the 2006 Act or its regulations authorizes the use of a subsequent DRO, posthumous or not, to reallocate benefits vested in one payee to another payee. The statute and regulations simply note that timing alone cannot render a QDRO invalid. But the majority would read these authorities to say that the time of filing is irrelevant regardless of its impact on the rights of others, as long as it occurs within a grace period provided to plan administrators to sort out claims to a plan’s benefits. In my view, neither the statute nor regulations supports the majority’s conclusion that the two nunc pro tunc orders here are valid QDROs. The orders fail not “solely because,the order [was] issued after, or revises, another domestic relations order or qualified domestic relations order,” nor “solely because of the time at which it [was] issued.” Id. § 2530.206(b)-(c). The two orders fail because they are posthumous, subsequent domestic relations orders that cause an unlawful reassignment of benefíts nowhere sanctioned by the statutory or regulatory scheme.
Thus, the majority’s first reason in süp-port of its position — that “[d]omestic relations orders entered after the death of the plan participant can be QDROs,” Op. 85 — is as unremarkable as it is unhelpful in resolving the essential issue underlying the validity of the two nunc pro tunc orders as QDROs: whether plan benefits had already vested in Barbara to Claire’s exclusion at the time of Harold’s death. If plan benefits had already vested, then the two nunc pro tunc orders here cause a reassignment of benefits from Barbara to Claire, in contravention of ERISA, and cannot serve as valid QDROs.
B. Plan Benefits Vested in Barbara upon Harold’s Death
The majority offers two reasons why plan benefits did not vest in Barbara upon Harold’s death, in spite of her status as Harold’s surviving spouse and sole designated beneficiary. Neither reason is persuasive.
First, the two state nunc pro tunc orders — issued in June and August of 2012— were “intended to be effective as of September 5, 2008,” and, thus, according to the majority, “effectively assigned] bene
For example, ERISA Section 206 precludes a proposed, subsequent QDRO from allocating benefit payments to an alternate payee where a valid, prior QDRO has already designated those benefits to another alternate payee. See 29 U.S.C. § 1056(d)(3)(D)(iii) (providing that a proposed QDRO is valid only if it “does not require the payment of benefits to an alternate payee which are required to be paid to another alternate payee under another order previously determined to be a qualified domestic relations order”). By the majority’s logic, however, a state court could adopt a legal fiction placing the second QDRO prior in time to the first. This would then produce the baffling outcome of rendering void the earlier, valid QDRO for its violation of Section 206. This is but one example of the bizarre results that would flow naturally from the majority’s unconstrained view of state nunc pro tunc powers within ERISA’s federal statutory context.
The majority’s second reason for concluding that plan benefits did not vest in Barbara upon Harold’s death is that “[a] surviving spouse ... does not gain an irrevocable right to plan benefits until after the plan administrator has determined that a domestic relations order is not [a QDRO].” Op. 88. This theory lacks a firm foundation in ERISA’s statutory scheme and is at odds with ERISA’s underlying principles. A brief overview of the statutory landscape within which DROs function is instructive.
ERISA establishes an intricate and comprehensive federal regulatory scheme that seeks to impose efficient, predictable, and uniform national standards on employee benefit plans. See Conkright v. Frommert,
In light of this statutory scheme, numerous courts have concluded or implied that surviving spouse benefits vest in the participant’s spouse at the time of the participant’s retirement or preretirement death; I share that view. See, e.g., Rivers v. Cent. & S.W. Corp.,
Once surviving spouse benefits vest, those benefits are no longer the participant’s (or his estate’s) and, thus, cannot be subsequently reassigned from the participant (or his estate) to an alternate payee through a posthumous QDRO or otherwise. See Hopkins,
The majority resists this conclusion. It references several Courts of Appeals decisions in support of its position, but all of them are materially distinguishable. See Op. 86, 88 (citing Files v. ExxonMobil Pension Plan,
Files, Patton, and Hogan evaluated the validity of posthumous QDROs but none involved a surviving spouse and a former spouse/alternate payee’s competing claims to the same benefits and none addressed the unique vesting question we confront here. Indeed, the Third Circuit in Files expressly distinguished the Fourth Circuit’s Hopkins decision On this basis: “The Fourth Circuit held that the DRO was not a QDRO because the current wife’s right to the survivor’s benefits had already vested upon the plan participant’s retirement. But, the key distinction between Hopkins and Files’s claim is that in Hopkins, there was an attempt to divest benefits already vested in a subsequent spouse, whereas here, there was no such vesting....” Files,
In support of its vesting theory, the majority also looks to ERISA procedures requiring that the plan administrator segregate funds payable to an alternate payee while the administrator evaluates, within a specified eighteen-month grace period, whether a submitted DRO qualifies .as a valid QDRO. See Op. 87-88 (citing 29 U.S.C. 1056(d)(3)(H)(i)). But this provision cannot bear the weight the majority places on it. First, nowhere does the provision purport to affect the vesting of benefits; it speaks only to allowing a plan administrator a grace period to evaluate a DRO after benefits have already become payable.
Second, the far-reaching vesting theory that the majority infers from this grace period provision would wreak havoc on the administrability and predictability of plan benefits. The majority’s theory would permit, for example, the following nightmare situations:
Scenario One: Participant is three times married — not so far-fetched in today’s world. Participant divorces Spouse One and executes a property agreement that gives her an interest in his pension. No QDRO is filed as a result of attorney indolence. Participant remarries but subsequently divorces Spouse Two, who leaves acquiring a similar (and equal) interest in Participant’s pension. Spouse Two’s attorney diligently files a QDRO. Participant again remarries but Spouse Three is a tolerant soul who remains married to Participant at the time of his preretirement death. She is the sole named beneficiary of Participant’s death benefits. In this scenario, Spouse Two and Spouse Three have interests in Participant’s death benefits under ERISA. By the majority’s logic, however, a state court could issue a posthumous QDRO on behalf of Spouse One that results in cutting off the interests of Spouse Three but, due to the regulations, could not undermine the interests of Spouse Two. This result is as absurd as it is inequitable.
Scenario Two: Plan Administrator and Surviving Spouse, through no fault of their own, operate wholly unaware of the existence of Former Spouse’s state DRO-ere-ated interest in Participant’s plan. For nearly a year and a half after the date on which the first payment would be required under the DRO, ie., within the grace period, Plan Administrator and Surviving Spouse are kept in the dark, and Plan Administrator segregates no alternate
These illustrations of the majority’s vesting theory are a far cry from the predictable outcomes and easily administrable rules that ERISA’s intricate scheme would seem to envision, and they are too drastic a departure from that scheme to justify on the basis of ERISA’s grace period provision. Even courts that generally share the majority’s view do not go so far.
Although the majority does not fully articulate its vesting theory, the Ninth Circuit’s Tise decision most closely resembles the reasoning on which the majority likely rests its conclusion: a state DRO attempts to create an interest for the alternate payee in the participant’s plan, the participant dies preretirement, and the state DRO is subsequently upheld as enforceable through a posthumous QDRO filed within the specified eighteen-month period such that the named beneficiary does not receive her designated benefits despite her status as such at the time of the participant’s preretirement death.
But Tise is distinguishable in at least one critical respect: the Ninth Circuit impliedly adopts a limiting principle — nowhere found in the majority’s opinion or implicit reasoning — that would assuage some of the predictability and administra-bility concerns arising from the earlier-identified nightmare scenarios. Tise involved competing claims to the same plan benefits but, there, the plan administrator was placed on notice of the alternate payee’s state DRO-created interest in the participant’s plan before the triggering event occurred, that is, before the participant’s death. See Tise,
Pre-death notice was integral to the Ninth Circuit’s conclusion that ERISA allows an alternate payee armed with a state DRO prior to the participant’s death “to perfect the DRO into a QDRO thereafter,” subject to the eighteen-month period.
That is the more extreme scenario we are presented with here. Nothing in the record establishes that the plan administrator (or Barbara) was placed on notice of Claire’s 2008 DRO prior to Harold’s death. And for reasons earlier described, it would seriously undermine ERISA’s statutory scheme and animating principles to permit Claire’s posthumous orders to deny Barbara her survivor benefits, not exclusively but especially when there was no pre-death notice of the competing interest. In sum, even a generous view of ERISA’s eighteen-month grace period provision exposes the majority’s unbridled vesting theory as excessive and renders the state court nunc pro tunc orders here invalid.
C. The Nunc Pro Tunc Orders Likely Violate Annuity Benefit Reputations
The nunc pro tunc orders also falter, with regard to at least two of the three plans at issue, because they appear to violate surviving spouse annuity benefit regulations. The Department of Labor regulations issued pursuant to the 2006 Act delineate the permissible scope of DROs issued after the starting date of an annuity benefit. Applying the Timing regulation to annuity benefits, Example 3 illustrates that an order issued after the starting date of an annuity benefit is not invalid solely because it is issued after that start date. See 29 C.F.R. 2530.206. Even after a life annuity has become payable to a participant, a QDRO may still validly issue, assigning the proceeds from that life annuity to another party. Id.
The example cautions, however, that although the QDRO does not fail because it issues after an annuity start date, it would fail under ERISA Section 206 if it requires reannuitization of the annuity benefit. Id. In a statement issued in conjunction with the regulations, the Department of Labor elaborates on a few such scenarios:
Examples of an order requiring a rean-nuitization with a new annuity starting date would include an order issued after the annuity starting date [ (i) ] directing the plan to substitute one measuring life for another or [ (ii) ] directing the plan to change the form of benefit, such as from a single life annuity to a qualified joint and survivor annuity (QJSA) with a death benefit or from an annuity to a lump sum payment.
75 Fed.Reg. 32848. The Department’s statement also indicates that even where a proposed QDRO does not require reannui-tization, a posthumous reassignment of surviving spouse annuity benefits to a pri- or spouse would nonetheless be invalid because it reallocates an already-allocated benefit:
With regard to the principle, expressed above, that a domestic relations order issued after the annuity starting date does not violate the requirements [for QDROs] merely because the order requires the allocation of some or all of the participant’s determined monthly benefit payment to an alternate payee, the Department, based on its review of sections 206 and 205 of ERISA, the case law, and other relevant guidance, is of the view that such principle does not apply to a domestic relations order that is received after the annuity starting date and that requires an allocation to an alternate payee of some or all of the death benefit that, under the form of benefit in effect, is payable to another beneficiary. An example of this is aplan’s receipt of a domestic relations order after the annuity starting date of a QJSA that assigns to the participant’s former spouse a shared payment of the participant’s current spouse’s survivor benefits under the QJSA.
Id. (emphasis added) (footnote omitted). Here, two of the three plans at issue — the CAP Plan and the 403(b) Plan — by their terms appear to include surviving spouse annuity benefits in the form of a QPSA, which are subject both to the reannuitization bar as well as to the Department’s threshold rejection of posthumous QDROs purporting to reallocate “death benefits” after an annuity’s starting date.
But the majority glosses over the annuity components of the CAP and 403(b) Plans. Nowhere does it adequately evaluate whether the state court nunc pro tunc orders trigger reannuitization of Harold’s plan annuity benefits, for example, by changing the annuity measuring life from Barbara’s to Claire’s, see Aug. 1, 2012 Nunc Pro Tunc QDRO, App. 43 (“If applicable to the form of benefits elected by the Alternate Payee [Claire], the Assigned Benefit shall be adjusted in accordance with the Plan’s actuarial assumptions to be paid for the life of the Alternate Payee [Claire].”), or by changing the form of the benefit from an annuity to a lump sum payment, see June 18, 2012 Nunc Pro Tunc QDRO, App. 48 (“The Alternate Payee [Claire] may elect, in writing, to receive the Assigned Benefit in a single lump sum as soon as administratively feasible after this Order is accepted by the Plan Administrator.”). Moreover, the majority also fails to engage in the threshold inquiry of whether these state court orders are susceptible to the Department’s rejection of posthumous QDROs purporting to transfer “some or all of the death benefit” from a surviving spouse to an alternate payee after an annuity starting date. See 75 Fed. Reg. 32848.
The reason that the majority offers for its failure to thoroughly engage whether the two nunc pro tunc orders violate surviving spouse annuity benefit regulations is that Barbara’s brief never raised the issue. Op. 88 n. 8. But the majority fails to honor its own limiting principle, since its arguments in favor of validating the two nunc pro tunc orders rely on statutory and regulatory provisions — including the 2006 Act and related Department of Labor regulations and statements — nowhere cited in either Claire’s or Barbara’s briefs, or in the District Court opinion.
ERISA includes a host of federal protections for pensioners and beneficiaries that exhibits multiple points of contact with state law. Because this case presents significant ERISA questions of first impression in this Circuit, both the majority and I have looked beyond the presentments of the parties. See Kamen v. Kemper Fin. Servs., Inc.,
But one cannot venture there halfway. To understand this statutory and regulatory scheme, one must scrutinize it from every available angle. Guidance from the agency that Congress entrusted to explain it would have been most helpful here but, unfortunately, the Department of Labor’s views have not been solicited.
Conclusion
Matrimonial lawyers rarely come to federal court. But the expansion over the
In my view, that did not occur here. And while Harold certainly seems the scoundrel, that is not a good reason to rely on legal fictions that may cause far more harm than good in future cases simply to make right the wrong that Harold visited upon his first wife, Claire. I fear the majority’s resolution of this case will only create more uncertainty and difficulty in an already muddled and frustrating area of federal law. Recognizing the two state court nunc pro tunc orders as valid QDROs will contravene ERISA’s statutory and regulatory scheme and undermine the bright-line, predictable, and easily admin-istrable rules critical to the efficient administration of ERISA-governed pension and retirement plans. Cf. Kennedy v. Plan Admin. for DuPont Sav. & Inv. Plan,
. No one contends that the QDROs misstate Claire’s interest in the three identified plans, as provided for in the Settlement Agreement.
. The CAP Plan also appears to permit the . alternative election of an actuarially equivalent lump sum.
. The majority disagrees that the state court nunc pro tunc power it contemplates has any potential for harm. Op. 87 n. 4. But it never explores why these concerns are unfounded. Instead, the majority points to secondary sources to confirm the plain notion that nunc pro tunc QDROs are not per se invalid. I have no quarrel with certain uses of nunc pro tunc QDROs, and neither do the Department of Labor’s regulations. I assert simply that state court nunc pro tunc powers are not unlimited and cannot be permitted to subvert ERISA’s intricate antialienation scheme. As explained above, the nunc pro tunc orders here do just that.
. The majority rejects these cases because they are purportedly "in tension with” ERISA’s grace period provision. Op. 88 n. 7. This begs the question, of course, since the interplay of ERISA's antialienation, QDRO, and grace period provisions is the very thing we examine here. The majority also rejects these cases because two of them — Hopkins and Rivers — were decided prior to the Pension Protection Act of 2006. Id. This is irrelevant because the 2006 Act does not address the competing claims to benefits vesting question at issue here or in those cases. Indeed, in the Department of Labor’s statement following the 2006 Act, issued in June 2010, the Department employs both Hopkins and Rivers as relevant authority in expressly rejecting the posthumous reassignment of surviving spouse annuity benefits to a prior spouse. See 75 Fed.Reg. 32848 n. 6; Dissent 96-97. If, as the majority implies, these cases are no longer good law, someone ought to inform the Department of Labor, the agency entrusted by Congress to explain this thorny area of ERISA.
. The majority takes issue with this pre-death notice consideration, see Op. 87 n. 6, but, ironically, fails to realize that this limiting principle comes from cases that the majority relies on to support its misuse of ERISA's grace period provision in order to justify its vesting theory. Courts that share the majority’s view have adopted this limiting principle in order to dampen the effects of an otherwise unconstrained theory capable of absurd results. See, e.g., Dissent 94-95. The majority’s disavowal of this limiting principle thus highlights the isolation and extremity of its position.
Moreover, the majority misunderstands the Department of Labor’s statement on pre-death notices because it overlooks the confusion that the statement clarifies. In regards to the Timing regulation’s “Orders issued after deatf/’ example, the Department explained that where a spouse has a DRO but does not qualify it before the participant’s death, the spouse's failure to submit pre-death notification of the DRO to the plan does not undermine her efforts to file a posthumous QDRO. See 75 Fed.Reg. 32848. But as earlier discussed, this example does not contemplate a competing claim to benefits by a surviving spouse or second alternate payee. Court decisions that the majority cites in order to support its vesting theory have relied on pre-death notice to limit an otherwise unconstrained view of ERISA's grace period provision where there exists a competing claim to benefits.