Supreme Court Justices Ask Solicitor General To Weigh in on Use of Divorce Waiver
The U.S. Supreme Court March 20 invited the U.S. Solicitor General to file a brief expressing his views in a dispute over whether a retirement plan participant who named his spouse at the time of his retirement as his surviving spouse could change that designation after the couple divorced and the ex-wife agreed to waive her right to his benefits (McGowan v. NJR Serv. Corp., U.S., No. 05-853, invitation to file brief 3/20/06).
In a divided opinion, the U.S. Court of Appeals for the Third Circuit last September ruled that the participant, James McGowan, could not change his beneficiary designation even though his ex-wife had waived her right to benefits (423 F.3d 241, 31 FLR 1524).
Circuit Split
In his petition for Supreme Court review (see, 32 FLR 1143), McGowan asked the high court to decide whether ERISA plan administrators should be mandated by federal common law to recognize the waiver of a beneficial interest and whether recognition and enforcement of a waiver would undermine ERISA's goals that plans be uniform in their interpretation and simple in their administration. He also asked whether it violates ERISA § 404(a)(1)(D) for a plan administrator to consider external documents other than plan documents to decide the validity of a waiver of benefits and questioned whether recognition and enforcement of a waiver would contravene ERISA's anti-alienation provisions.
McGowan urged the Supreme Court to resolve a circuit split and asserted that the Fourth, Fifth, Seventh, Eighth, and Tenth circuits have held that plan administrators may recognize a beneficiary's waiver of benefits under federal common law, while the Second, Third, and Sixth circuits have disagreed.
Issue Already Resolved?
In its brief opposing Supreme Court review, New Jersey Natural Gas argued that the high court resolved the issue in Boggs v. Boggs, 510 U.S. 833, 23 FLR 2051(1997), when it "clearly indicated that the minority rule [followed by the Third Circuit] is the correct one." Boggs also ruled that "beneficiary status may be conferred on non-plan participants only in narrow circumstances, namely by way of a [qualified joint and survivor annuity] or a [QDRO]," the company said. It asserted that "a plan administrator may not recognize a waiver contained in a non-QDRO state domestic relations order, such as the divorce decree issued to" McGowan and his second wife. ERISA and applicable regulations provide that a new retiree may elect to waive survivor benefits only during the 90-day period prior to receiving the first payment, the company argued, adding that the regulations "clearly provide that the spouse to whom a participant is married on his annuity starting date is entitled to joint and survivor annuity protection if a divorce subsequently occurs." Spousal waiver made after the benefits have started is effective only if it is made pursuant to a QDRO, the company said.
