Metropolitan Life Ins. Co. v. Wheaton

Decision Date14 December 1994
Docket NumberNo. 94-1362,94-1362
Citation42 F.3d 1080
Parties, 18 Employee Benefits Cas. 2661, Pens. Plan Guide P 23904B METROPOLITAN LIFE INSURANCE COMPANY, Plaintiff, v. Rose Marie WHEATON, Defendant-Appellant, and Douglas Wheaton and Daniel Wheaton, Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Michael W. Fleming (argued), Raasch, Fleming & Reidenbach, Milwaukee, WI, for defendant-appellant.

Joseph J. Welcenbach (argued), Welcenbach & Widmann, Richard W. Double, Double & Double, Milwaukee, WI, for defendants-appellees.

Before POSNER, Chief Judge, MANION, Circuit Judge, and ASPEN, District Judge. *

POSNER, Chief Judge.

This appeal presents questions of statutory interpretation in the context of a divorce decree that seeks to regulate the distribution of benefits under an ERISA welfare (as distinct from pension) plan. Frank Wheaton was a participant in the General Electric Employee Welfare Plan. One of the benefits provided by the plan was group life insurance. Wheaton and his wife divorced, and a stipulation incorporated in the divorce decree required both parties to "maintain ... the life insurance which is presently carried through his/her employer with the children of the parties named as sole and irrevocable primary beneficiaries until the youngest minor child reaches the age of majority or until such child has reached the age of nineteen (19) so long as the child is pursuing an accredited course of instruction leading to the acquisition of a high school diploma or equivalent." The Wheatons had two children, boys aged 15 and 17 on the date of the decree. Shortly after the decree took effect Wheaton remarried and named his new wife as the exclusive beneficiary of his GE group life insurance. A year later he died. Both his widow and his boys (the older of whom was now 19, the younger 17) claimed the proceeds of the life insurance, some $60,000. Metropolitan Life Insurance Company, the claims administrator under the GE plan, interpleaded the contending claimants. The district judge gave judgment for the boys, and the widow appeals.

ERISA states that its provisions "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. Sec. 1144(a). But there is an exception, added by the Retirement Equity Act of 1984, for "Qualified Domestic Relations Orders." Sec. 1144(b)(7). Such an order is defined as a domestic relations order that, so far as relevant here, "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." Sec. 1056(d)(3)(B)(i). To qualify, the order must "clearly specif[y]" three things: the mailing address of each alternate payee, "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," and "each plan to which such order applies." Secs. 1056(d)(3)(C)(i), (ii), (iv).

The section from which we have been quoting, 29 U.S.C. Sec. 1056(d), where qualified domestic relations orders are defined and their requirements specified, begins with a declaration that "Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated." Sec. 1056(d)(1) (emphasis added). Later the section states that the subsection we just quoted "shall not apply if the order is determined to be a qualified domestic relations order. Each pension plan shall provide for the payment of benefits in accordance with the applicable requirements of any qualified domestic relations order." Sec. 1056(d)(3)(A) (emphasis added). And the section was added to ERISA, as we have said, by the Retirement Equity Act, although the Act's definition of qualified domestic relations orders is not, in so many words anyway, limited to pension plans. The widow's first argument is that the exception for qualified domestic relations orders to the nonassignability and inalienability of an interest in an ERISA plan is limited to pension plans, and here we have a welfare plan.

There is a logically prior issue--whether if the Retirement Equity Act is inapplicable to welfare plans, as the widow contends, a provision in a divorce decree specifying the beneficiary of an employee's interest in an ERISA welfare plan simply is outside the scope of ERISA's preemption clause. We think it important to flag the issue; though neither party has raised it, it is sure to recur.

The draftsmen of the Retirement Equity Act took pains to forbid expressly, though with some exceptions, the alienation or assignment of pension plan benefits, including alienation or assignment by a divorce decree. This would not have been necessary had it been clear that ERISA's general preemption clause (26 U.S.C. Sec. 1144(a)) already prohibited such means of alienation. But it was not clear that the general clause, in prohibiting the states from regulating pension plans, necessarily forbade them to specify the allocation of plan benefits in the event of a divorce. Preemption so encompassing would invade the domestic relations jurisdiction of the states, a matter traditionally of state prerogative. Hisquierdo v. Hisquierdo, 439 U.S. 572, 581, 583, 99 S.Ct. 802, 808, 809, 59 L.Ed.2d 1 (1979); Lloyd v. Loeffler, 694 F.2d 489, 491-92 (7th Cir.1982). If the general provision on pre-emption does not reach that far, then even if the second Mrs. Wheaton were correct that the Retirement Equity Act is totally inapplicable to welfare plans, she would lose.

Before that Act was passed, we had held that ERISA did not preempt state domestic relations law. Savings & Profit Sharing Fund v. Gago, 717 F.2d 1038 (7th Cir.1983). We were not alone in this view, see Operating Engineers' Local # 428 Pension Trust Fund v. Zamborsky, 650 F.2d 196 (9th Cir.1981), but there were cases opposed (see discussion in Fox Valley & Vicinity Construction Workers Pension Fund v. Brown, 897 F.2d 275, 278-79 (7th Cir.1990) (en banc); Herberger v. Shanbaum, 897 F.2d 801, 804 (5th Cir.1990); S.Rep. No. 575, 98th Cong 2d Sess. 18-19 (1984) U.S.Code Cong. & Admin.News 1984 at 2547, 2564-2565), and the Retirement Equity Act was Congress's effort to repair the split. See Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825, 838-39, 108 S.Ct. 2182, 2190-91, 100 L.Ed.2d 836 (1988). Obviously the specific holding of Gago did not survive the passage of the Act, at least so far as domestic relations orders concerning pension benefits are concerned; unless those orders comply with the requirements for a qualified domestic relation order, they are preempted. But if the Act has no application to welfare plans, maybe it did not disturb the principle of Gago with regard to domestic relations orders limited to such plans, as the one in this case was. Stackhouse v. Russell, 447 N.W.2d 124 (Ia.1989), so holds, but without mention of the Retirement Equity Act.

The widow is trying to walk a fine line. The anti-alienation provision added by the Retirement Equity Act is, by its terms, applicable only to pension plans; and every court to consider the issue has limited its scope accordingly. Nichol v. Pullman Standard, Inc., 889 F.2d 115, 119-21 (7th Cir.1989); Anweiler v. American Electric Power Service Corp., 3 F.3d 986, 994 (7th Cir.1993); United States v. International Brotherhood of Teamsters, 941 F.2d 1292, 1298 (2d Cir.1991); Misic v. Building Service Employees Health & Welfare Trust, 789 F.2d 1374, 1376-77 (9th Cir.1986) (per curiam). She is relying on the general preemption provision of ERISA to knock out all but qualified domestic relations orders and seeking to confine the exception for qualified domestic relations orders to those orders that affect interests in pension plans, in order to prevent the divorce stipulation in the present case from being enforced. We think this attempt must fail even if (an issue we need not decide, and ought not since it was not raised by the parties) the general preemption provision has, contrary to cases like Gago that preceded the Retirement Equity Act, the broad scope that she ascribes to that provision.

The primary concern of the draftsmen of the Retirement Equity Act was, it is true, with retirement, and hence with the pension provisions of ERISA. (In addition to the conspicuous textual clues noted earlier, see S.Rep. No. 575, supra.) Nevertheless the definition of qualified domestic relations orders is not limited to orders that affect pension plans. It applies to all plan participants. What is more, the exemption of such orders from the preemptive sweep of ERISA appears not in the section of the statute that defines those orders and prescribes the conditions for effectuating and enforcing them (29 U.S.C. Sec. 1056), but rather in the section that contains the general pre-emption provision (Sec. 1144), and that provision, of course, applies to welfare and pension plans alike. True, the subsection that exempts qualified domestic relations orders (Sec. 1144(b)(7)) defines what it is that is being exempted by incorporating the definition of qualified domestic relations orders that appears in the section creating those orders (Sec. 1056); but that definition, too, is in terms of all plans rather than just pension plans.

We are not slaves to literalism, but we cannot understand why, if a qualified domestic relations order can override the designation of beneficiary in a pension plan, as Congress in the Retirement Equity Act decided that it can, Congress would not have allowed such an order to override the designation of beneficiary in a welfare plan. The draftsmen of the Retirement Equity Act were concerned with the financial security of the spouses and other survivors of employees who died enrolled in ERISA plans. S.Rep. No. 575, supra, at 12, U.S.Code Cong. & Admin.News 1984 at 2558; Hurwitz v. Sher, 982 F.2d 778, 781 (2d Cir.1992)....

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