In re Estate of MacAnally, No. 99CA0120.

• Decision Date: 30 March 2000
• Docket Number: No. 99CA0120.
• Citation: 20 P.3d 1197
• Parties: In the Matter of the ESTATE OF Richard B. MacANALLY, Deceased. The Estate of Richard B. MacAnally, Appellant, v. Imogene V. Levin, Objector-Appellee.
• Court: Colorado Court of Appeals

20 P.3d 1197

In the Matter of the ESTATE OF Richard B. MacANALLY, Deceased.

The Estate of Richard B. MacAnally, Appellant, v. Imogene V. Levin, Objector-Appellee.

No. 99CA0120.

Colorado Court of Appeals, Div. V.

March 30, 2000.

Rehearing Denied June 1, 2001.

Certiorari Denied April 16, 2001.

Hutchinson Black and Cook, L.L.C., James England, Rachel Maizes, Boulder, Colorado, for Appellant.

Holme Roberts & Owen, LLP, John R. Webb, Renee W. O'Rourke, Stephanie M. Tuthill, Denver, Colorado, for Objector-Appellee.

Opinion by Judge TAUBMAN.

In this action for payment of benefits pursuant to the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq. (1994), appellant, the Estate of Richard B. MacAnally (Estate), appeals the trial court's award of benefits in favor of appellee, Imogene V. Levin. We affirm.

MacAnally and Levin were married in 1967. In 1972, MacAnally became a member of the faculty at the California Institute of Technology (Cal Tech). At that time, MacAnally executed two annuity contracts issued by Teacher's Insurance and Annuity Association and College Retirement Equities Fund (TIAA-CREF). MacAnally named Levin as beneficiary of those annuity contracts. Cal Tech made contributions to the annuity contracts until 1974 when MacAnally terminated his employment with Cal Tech. In 1974, Levin and MacAnally also divorced, and as part of the property settlement, MacAnally received the annuity contracts as his sole and separate property.

In 1987, MacAnally remarried. He died in July 1997, still married to his second wife. However, at the time of MacAnally's death, Levin remained as the beneficiary designated on MacAnally's TIAA-CREF annuity contracts.

After MacAnally's death, the TIAA-CREF administrator filed a petition requesting that MacAnally's TIAA-CREF annuity plan benefits be deposited into the registry of the district court pending the court's determination of the proper distribution of funds. Levin filed an objection, asserting that the annuity plan was subject to ERISA, and that as the named beneficiary she was entitled to death benefits pursuant to the plan provisions. The Estate sought plan benefits under § 15-11-804, C.R.S.1999, which by operation of law revokes any beneficiary designation of a spouse from whom a decedent was divorced at the time of death. Agreeing with Levin, the trial court ordered that the proceeds from MacAnally's TIAA-CREF annuity be paid to her as the sole designated beneficiary of the contracts. This appeal followed.

I. ERISA Applicability

The Estate contends the trial court erred in determining that ERISA applies to MacAnally's annuity contracts. It argues that ERISA does not apply when the benefits at issue were entirely funded and the significant events affecting distribution decisions occurred before ERISA became effective in 1975. We are not persuaded.

The trial court's determination regarding ERISA applicability raises a question of law and is therefore subject to de novo review. Lakeview Associates, Ltd. v. Maes, 907 P.2d 580 (Colo.1995).

ERISA is a comprehensive statute regulating employee pension and welfare plans. "ERISA imposes participation, funding, and vesting requirements on pension plans and sets various uniform standards including rules concerning reporting, disclosure, and fiduciary responsibility for both pension and welfare plans." Celebrity Custom Builders v. Industrial Claim Appeals Office, 916 P.2d 539, 542 (Colo.App.1995).

In 29 U.S.C. § 1144(b)(1)(1994), Congress expressly defined the plans to which ERISA applies. This section provides that "[ERISA] shall not apply with respect to any cause of action which arose, or any act or omission which occurred, before January 1, 1975." This section is relevant to our analysis here because some of the acts or omissions relating to MacAnally's TIAA-CREF benefits occurred prior to January 1, 1975, while other acts giving rise to Levin's cause of action occurred after the effective date.

We are not aware of a Colorado case interpreting 29 U.S.C. § 1144(b)(1). However, courts of other jurisdictions have considered when substantial acts relating to benefits entitlement occurred — both before and after the ERISA effective date. These cases articulate a two-pronged test for determining whether ERISA applies. First, a court must look at when the cause of action accrued. Second, the court must determine when the conduct that formed the basis for the claim occurred. Menhorn v. Firestone Tire & Rubber Co., 738 F.2d 1496 (9th Cir.1984). When the "substantial acts contributing to a cause of action occur after the [effective] date, ERISA is applicable to the cause of action." Lafferty v. Solar Turbines International, 666 F.2d 408, 410 (9th Cir.1982).

It is undisputed that the annuity contracts are "employee pension benefit plans," as defined by ERISA, and are subject to the provisions of ERISA, unless they are excluded pursuant to 29 U.S.C. § 1144 (1994). Although the trial court defined the contracts as "welfare benefit plans," the contracts were actually "pension benefit plans" because they were retirement annuity contracts. They were not established "for the purpose of providing for . . . participants or their beneficiaries, through the purchase of insurance or otherwise, . . . medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment. . . ." 29 U.S.C. § 1002 (1994).

In support of its argument, the Estate relies on cases holding that, although a cause of action for determining a plan participant's benefits may have arisen after ERISA's effective date, ERISA will not apply when all the significant or substantial acts or omissions occurred before ERISA's effective date. See Jameson v. Bethlehem Steel Corp. Pension Plan, 765 F.2d 49 (3d Cir.1985)

(ERISA does not apply where significant acts or omissions occurred prior to the effective date, despite the fact that the cause of action arose after the effective date); Menhorn v. Firestone Tire & Rubber Co., supra (denial of plan benefits after ERISA effective date was insufficient basis for ERISA application because determination of benefits entitlement was based on events which occurred before the effective date); Martin v. Bankers Trust Co., 565 F.2d 1276 (4th Cir.1977) (ERISA inapplicable where employment relationship terminated and employee requested benefits prior to ERISA's effective date); Grich v. Wood & Hyde Leather Co., 74 A.D.2d 183, 427 N.Y.S.2d 96 (1980) (ERISA inapplicable to claim for pension benefits where significant acts giving rise to claim occurred prior to ERISA effective date).

We conclude these cases are distinguishable because the relevant acts or omissions here consisted of the contributions to the annuity contracts, MacAnally's termination from employment at Cal Tech, and the divorce between MacAnally and Levin. It is undisputed that all these acts occurred before ERISA became effective January 1, 1975. We further conclude that the death of MacAnally was not a substantial "act or omission," but rather was the "conduct" that gave rise to Levin's cause of action. See Menhorn v. Firestone Tire & Rubber, Co., supra; Lafferty v. Solar Turbines International, supra.

Pursuant to the TIAA-CREF plan, Levin was entitled to a death benefit in the event MacAnally died before retirement without changing the beneficiary. The death benefit is distinguished from MacAnally's retirement benefits in that the death benefit was only payable if MacAnally died before he retired, whereas the retirement benefits were payable to MacAnally if he survived until his retirement. MacAnally could have changed the beneficiary of his TIAA-CREF benefits at any time between the 1974 divorce and his death in 1997, but chose not to do so during those 23 years. Therefore, if MacAnally had changed the beneficiary or survived until retirement, Levin would not have been entitled to the death benefits because MacAnally would have begun collecting the payments. Levin had a cause of action to collect the death benefits only if MacAnally died before retirement without changing the beneficiary.

Here, the trial court determined that the relevant "act or omission" was either the 1990 enactment of the divorce revocation statute, § 15-11-804(7)(c) C.R.S., 1999, or MacAnally's death in 1997. Based on this determination, the trial court held that the significant acts or omissions occurred after ERISA's effective date, and therefore, that ERISA applies.

However, we conclude that although the relevant acts or omissions occurred prior to January 1, 1975, these acts were not significant as contemplated in the cases discussed above. See Lafferty v. Solar Turbines International, supra

(where substantial acts contributing to cause of action occur after ERISA effective date, ERISA applies, despite the fact that acts affecting a plan also occurred before ERISA effective date); see also Grich v. Wood & Hyde Leather Co., supra (recognizing that if acts prior to ERISA effective date were minor and other acts giving rise to cause of action occurred after ERISA effective date, ERISA could apply). Rather, MacAnally's death in 1997, his failure to change the beneficiary, and the enactment of the divorce revocation statute were acts which constituted significant conduct giving rise to Levin's cause of action.

Because MacAnally's death occurred well after the ERISA effective date, we conclude ERISA applies in determining the party entitled to payment of MacAnally's TIAA-CREF benefits — Levin or the Estate.

II. ERISA Preemption

The Estate next contends the trial court erred in determining that ERISA preempted the application of the Colorado divorce revocation statute. We disagree.

The purpose of ERISA is "to protect the interests of employees and their beneficiaries in employee benefit plans and to ensure that plans and plan sponsors are subject to a uniform body of benefit law by minimizing the...