Typically, decisions regarding equitable distribution and other matrimonial matters are issued by New York State’s Supreme Court, which has jurisdiction over divorce matters. However, with respect to retirement plans that are regulated by the Federal Government under ERISA, preemption sometimes results in matters being adjudicated in Federal District Court. This is precisely what occurred in the matter Hess v. Wojcik-Hess, in which the U.S. District Court for the Northern District of New York ruled that GE acted appropriately by making payments to the defendant-wife for her interest in her deceased husband’s retirement plans, notwithstanding clear waiver language contained in the parties’ separation agreement.

            The decision, which was issued on January 26, 2010, involved a fairly typical scenario: a separation agreement containing language stating that one spouse was waiving any interest or claim in the other spouse’s retirement benefits in exchange for a lump sum payment. In its decision, the District Court characterized the operative terms of the Agreement as follows:

Under the agreement, Karen acknowledged Robert's retirement savings and pension under a plan administered by GE, and "waive[d] any claim or interest which [she] may have in [Robert's] retirement savings and pension plan." … Like Robert, Karen accepted the agreement "in full settlement and satisfaction of any and all claims and rights against [Robert], his estate, his heirs or personal representatives" under the laws of New York or any other jurisdiction. … This release included, among other things, claims to "any and all pension, profit sharing, stock options, Keogh, IRA accounts, and testamentary substitutes . . . or any same or similar item. . . ." Karen received $40,000.00 as "her share of the equitable distribution of the parties’ marital assets."

            The parties further agreed that a divorce action would not be commenced until three and one-half years after the execution of the separation agreement. During that period, the husband, who was the plan participant, died. At the time of his death, he had two retirement accounts with his employer, GE, both of which had six-figure values. The husband’s estate commenced an action against the wife and GE, alleging that the wife had breached the parties’ separation agreement by receiving funds from the retirement accounts, and requesting injunctive relief precluding her from obtaining any further funds. GE removed the case to District Court, pursuant to ERISA.

In reciting the law applicable to the parties’ dispute, the Court noted that:

Under 29 U.S.C. § 1055, the surviving spouse of a participant vested in an ERISA plan is entitled to a "qualified pre-retirement survivor annuity" if the participant dies before the annuity starting date. See 29 U.S.C. § 1055(a)(2).

            The Court further noted that, under certain circumstances, a participant may waive his or her spouse’s right to such survivor benefits:

For instance, a participant may waive his surviving spouse's annuity "if the participant is legally separated . . . [and] has a court order to such effect." 26 C.F.R. § 1.401(a)-20, Q & A 27 (2006). However, absent a court order, a legal separation does not operate as a waiver under ERISA. See Bd. of Trs. of Equity-League Pension Trust Fund v. Royce, 238 F.3d 177, 179-82 (2d Cir. 2001). Moreover, a participant may only elect to waive his surviving spouse's annuity during the "applicable election period," which "ends on the date of the participant's death." 29 U.S.C. §§ 1055(c)(1)(A)(i), 1055(c)(7)(B).

            As suggested by the foregoing language, the absence of a court order precluded the finding of a waiver of the Wife’s interest, notwithstanding the clear waiver language contained in the parties’ separation agreement. The Court explained:

            The separation agreement between Robert and Karen does not change or defeat Karen's eligibility for the proceeds contained in Robert's S & SP and PPA. The court may not rely on New York State's law regarding trusts and estates, wills, or domestic relations to determine the beneficiary because the plan documents contain clear provisions governing eligibility. The mere existence of a separation agreement is insufficient to alter a beneficiary's eligibility under ERISA. See, e.g., Brown, 934 F.2d at 1197; McMillan, 913 F.2d at 311; Maclean, 831 F.2d at 728. Furthermore, the "limited circumstances" contemplated by the Boggs Court in which a surviving spouse's annuity is subject to waiver are not present here. See Boggs, 520 U.S. at 842 (citing 29 U.S.C. § 1055(c)(2)). Although Eric relies on Robert and Karen's separation agreement as evidence of Karen's consent to waive her rights to the proceeds, he has failed to present an accompanying court order. See 29 U.S.C. § 1055(c)(2)(B); 26 C.F.R. § 1.401(a)-20. Thus, Robert and Karen's separation agreement does not operate as a waiver under ERISA. Accordingly, Karen is entitled to payment of the proceeds in Robert's S & SP and PPA in the manner prescribed in the plan documents.

            The Court’s ERISA analysis absolves GE of any liability for its actions in making payments under the plans to Karen, the surviving spouse. Notably, the Court did not absolve the wife of potential liability to her deceased husband’s estate. The Court remanded the Estate’s state law claims (unjust enrichment and breach of contract) to state Supreme Court. In light of the foregoing, it is clear that the ERISA analysis applied by the Federal Court may be of little comfort to the wife, who executed a document that contained unambiguous an unambiguous waiver which seemingly sought to preclude precisely the type of financial windfall she has achieved.

By: Marc A. Rapaport, Esq. All Rights Reserved, September, 2008 This article does not constitute legal advice. This is for general information purposes only.

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