Marriage of Oddino, In re

• Citation: 65 Cal.Rptr.2d 566,939 P.2d 1266,16 Cal.4th 67
• Decision Date: 28 July 1997
• Docket Number: No. S055819,S055819
• Parties: , 939 P.2d 1266, 21 Employee Benefits Cas. 1481, 97 Cal. Daily Op. Serv. 5947, 97 Daily Journal D.A.R. 9551, Pens. Plan Guide (CCH) P 23936H In re the MARRIAGE OF Mary K. and James M. ODDINO. Mary K. ODDINO, Appellant, v. James M. ODDINO, Respondent; Hughes Aircraft Company Non-Bargaining Retirement Plan, Respondent.
• Court: United States State Supreme Court (California)

Page 566

65 Cal.Rptr.2d 566

16 Cal.4th 67, 939 P.2d 1266, 21 Employee Benefits Cas. 1481,

97 Cal. Daily Op. Serv. 5947,

97 Daily Journal D.A.R. 9551,

Pens. Plan Guide (CCH) P 23936H

In re the MARRIAGE OF Mary K. and James M. ODDINO.

Mary K. ODDINO, Appellant, v. James M. ODDINO, Respondent;

Hughes Aircraft Company Non-Bargaining Retirement Plan, Respondent.

No. S055819.

Supreme Court of California.

July 28, 1997.

Rehearing Denied Oct. 15, 1997.

Glasser and Smith, Robert Glasser, Irvine, for Appellant.

O'Melveny & Myers, Stephen J. Pepe, Wayne S. Jacobsen, Todd R. Wulffson and Larry A. Walraven, Newport Beach, for Respondent Hughes Non-Bargaining Retirement Plan.

Thomas S. Williamson, Jr., Washington, DC, J. Davitt McAteer, Mount Hope, WV, Marc I. Machiz, Berkeley, Daniel W. Teehan, Paula J. Page, Oakland, Theresa Gee, Karen L. Handorf, Washington, DC, Barbara A. Matthews, Bettina Redway, San Francisco, Paul, Hastings, Janofsky & Walker, Ethan Lipsig, Los Angeles, Proskauer, Rose, Goetz & Mendelsohn and Jeffrey A. Berman, Los Angeles, as Amici Curiae on behalf of Respondent Hughes Non-Bargaining Retirement Plan.

No appearance for Respondent James M. Oddino.

WERDEGAR, Justice.

Under provisions of the federal Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1001 et seq.; hereafter ERISA), private retirement plans may, pursuant to a state court's domestic relations order, pay a portion of an employee participant's retirement benefits directly to the employee's former spouse or dependents, if and only if the state court order meets certain specifications. Such an order is a "qualified domestic relations order" (hereafter a QDRO). (29 U.S.C. § 1056(d)(3).) ¹

In this case, we address two questions relating to ERISA and the division of private retirement benefits in a marital dissolution action. First, do the California courts have subject matter jurisdiction to decide whether a superior court's order assigning retirement benefits to the nonemployee spouse is a QDRO? Our answer is yes: state and federal courts have concurrent jurisdiction over that question under section 1132(e)(1). Second, does an order qualify as a QDRO if it requires the retirement plan to pay the nonemployee spouse a portion of the employee spouse's early retirement benefits without any actuarial reduction, where the employee spouse is eligible for such unreduced benefits upon early retirement but has not yet retired? We answer this question no: Such unreduced early retirement benefits include an employer subsidy for early retirement, which, under section 1056(d)(3)(E)(i)(II), may not be paid pursuant to a QDRO if the employee spouse has not separated from service.

FACTUAL AND PROCEDURAL BACKGROUND

The marriage of Mary K. and James M. Oddino was dissolved by the superior court On June 1, 1989, the Plan's administrator informed Mary and James the superior court order was a QDRO. The administrator noted, however, that the Plan interpreted the order as not mandating that payments to Mary include "the 'early retirement subsidy.' " In calculating the benefit to be paid Mary, the Plan reduced the monthly annuity amount, which was based on the annuity payable to James on retirement at age 65, by a factor of .4322. This reduction was to account for the fact monthly payments to Mary would begin before James's 65th birthday and would be paid for a longer period. The calculated benefit was, according to the Plan, "equal in actuarial value" to a benefit paid beginning on James's 65th birthday. The actuarial factor reduced Mary's payments, under the 60-month payout option she chose, from $3,618 to $1,564 per month. The Plan began making payments to Mary at the reduced rate in early 1990.

                in an interlocutory judgment filed January [939 P.2d 1269] 19, 1983.  During the marriage, James was employed by the Hughes Aircraft Company (Hughes) and participated in the Hughes Aircraft Company Non-Bargaining Retirement Plan (the Plan), which is administered by Hughes.  In the interlocutory judgment, Mary was awarded "that portion of [James's] retirement benefits payable, upon date of retirement, pursuant to the formula in Brown." 2  On March 24, 1989, pursuant to a stipulation by James and Mary, the court modified its judgment by determining more exactly Mary's share of the retirement benefits (36.6231 percent) and specifying that payments to Mary were to be determined "as if [James] had retired on April 1, 1988," and were to begin "as of" April 1, 1988, or as soon as practical thereafter.  April 1, 1988, was James's 55th birthday.  At the time of this order, James was still working at Hughes
                

Under the terms of the Plan, an employee who retires at or after age 55, and the sum of whose age and years of service is at least 75, is entitled to a benefit calculated without actuarial reduction, i.e., an annuity in the same periodic amount as if he or she had retired at age 65. This is known as the "Rule of 75." An employee who retires before age 55, or an employee who retires between the ages of 55 and 65 and whose age and years of employment do not total at least 75, is entitled only to an early retirement benefit reduced to the actuarial equivalent of the age 65 benefit. Had James retired on or after April 1, 1988, he would have been entitled to full benefits under the Rule of 75.

In March 1990, dissatisfied with the actuarially reduced payments, Mary joined the Plan in the marital dissolution action (see Fam.Code, § 2060) and sought an order requiring the Plan to pay her benefits calculated under the Rule of 75. The Plan opposed such an order on the ground it would not be a QDRO, and the Plan would therefore be forbidden under ERISA from making any payments to Mary under it.

The superior court denied the relief Mary requested, finding that the Rule of 75 "constitutes a subsidy rather than an accrued benefit," and is therefore "not payable to a spouse prior to the actual retirement of the working spouse." The Court of Appeal reversed and directed the superior court to order the Plan to pay Mary benefits under the Rule of 75. The appellate court held the Rule of 75 was not an employer subsidy, but was instead "the normal retirement benefit when the criteria of 75 years are met." For that reason, the court held, the superior court order would remain a QDRO even if construed to require the payment of unreduced benefits. We granted the Plan's petition for review.

DISCUSSION

I. Subject Matter Jurisdiction

The Plan contends the Court of Appeal was without jurisdiction to decide that the superior court order of March 1989, interpreted as requiring payment of Rule of 75 benefits to Mary before James's retirement, is a QDRO. The Plan's contention is based on its broader claim, endorsed as well by amicus curiae the United States Department of Labor The question of state court subject matter jurisdiction was not raised by the parties in either of the lower courts and was not addressed by the Court of Appeal; the Plan objected on jurisdictional grounds for the first time in its petition for review. As a matter of fundamental jurisdiction affecting the power of the lower courts to act, however, the issue must be addressed. (Consolidated Theatres v. Theatrical Stage Employees Union (1968) 69 Cal.2d 713, 721, 73 Cal.Rptr. 213, 447 P.2d 325.)

(DOL), that federal courts have exclusive [939 P.2d 1270] jurisdiction over the question whether a state court domestic relations order is "qualified" under ERISA.

We may properly address the question in the general form in which the parties discuss it: Does a state court have jurisdiction to determine that a domestic relations order is "qualified" under ERISA? Although neither the superior court nor the Court of Appeal directly ordered the Plan administrator to consider the March 1989 order a QDRO when construed as mandating payment under the Rule of 75, such a result was implicit in the Court of Appeal's direction that the administrator be ordered to pay Mary the Rule of 75 benefits. As the Court of Appeal recognized, the administrator could not, under the applicable provision of ERISA (§ 1056(d)(3)(A)), legally pay such benefits except pursuant to a QDRO. The Court of Appeal's command that the superior court order Mary to be paid Rule of 75 benefits was thus necessarily premised on the court's holding that such an order would be a QDRO.

The dispute over subject matter jurisdiction centers on a provision of ERISA giving the federal courts exclusive jurisdiction over some ERISA-related actions and giving state courts jurisdiction, concurrent with that of the federal courts, over others. Section 1132(e)(1) states a general rule of exclusive federal jurisdiction for actions brought under ERISA and provides a single possibly applicable exception--"actions under subsection (a)(1)(B) of this section"--as to which state and federal courts have concurrent jurisdiction. ³ Section 1132(a)(1)(B), in turn, authorizes actions by a retirement plan participant or beneficiary "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." Subsection (a)(3) of the same section authorizes participants and beneficiaries to bring civil actions to enjoin violations of ERISA or of the plan's terms, to obtain other equitable relief or redress for such violations, or to enforce provisions of ERISA or the plan. ⁴

Mary contends her request for relief against the Plan was in the nature of an action to recover benefits due her under the terms of the plan--specifically, benefits calculated pursuant to the plan's Rule of 75--and to clarify her right to such future benefits. It was therefore brought, Mary argues, under section 1132(a)(1)(B), and thus was the subject of concurrent state-federal jurisdiction under section 1132(e)(1). Mary relies on the only published decisions directly addressing this question, both of...