Prenuptial Agreement and Forced Waiver of Spousal Consent

A couple signs a prenup foregoing all claims to each others qualified plan benefits. But IRC Reg. Section 1.401(a)(20) is clear that prenups or other agreements entered into before marriage do not satisfy spousal consent requirements and case law supports this. However, the prenup I am examining states that after marriage, each spouse agrees to waive spousal consent pursuant to the QJSA rules. Thus, it would seem to me that the plan participant could go to state court and based on the contractual provisions of the prenup get a judgement requiring the spouse to waive spousal benefits. However, my view is that ERISA would preempt the state law contractual decision because it impacts plan benefits and plan rights and thus, the state court order would be deemed preempted by ERISA. Further, the state court order is clearly not a QDRO and would not have to be followed by the plan. Any thoughts on this?

To clarify my question above, the prenup requires each spouse after marriage to waive spousal benefits and thus sign spousal waiver of benefits. The plan participant is arguing that his spouse is contractually required to sign spousal waiver of benefits and if she does not he will go to court to enforce the prenup contract.

Facts: married couple, they contractually agreed to waive each other as death benefit beneficiaries and to consent to the other's waiver as required under ERISA.

The only concern of each plan is that the proper QPSA or (DC) similar election forms and consents are validly executed. It's up to the blissfully (?) married couple to fulfill their contractual obligations to each other. If one has to go to court to secure compliance from his/her spouse, so be it. 

One thing I know for sure is that I would not want to be living next to this couple!

A premarital agreement itself cannot waive survivor-annuity rights. ERISA § 205(c)(2)(A)(i); 26 C.F.R. § 1.401(a)-20, Q&A 28. Among several reasons, the spouse’s consent to a participant’s qualified election must be made by the spouse, and a person making a premarital agreement is not yet a spouse.

Recognizing the 1984 statute and the 1988 rule, especially after a few early 1990s court decisions followed it, a prenuptial agreement might include an obligation for each contractor to execute, promptly after the marriage is made, waivers and consents to implement the arrangements made in their agreement.

But such an agreement should have no effect in an ERISA-governed plan’s administration.

Rather, a plan’s administrator waits for a participant’s qualified election supported by the spouse’s consent, with witnessing and in a form the administrator finds meets ERISA § 205’s and the plan’s provisions.

Even if a State court’s order might command a prenuptial agreement’s contractor to sign a consent, such an order, without more, is not a qualified domestic relations order, and absent personal jurisdiction of the plan’s administrator, should have no effect in the plan’s administration.

Rather, a spouse decides whether to meet or breach an obligation under a prenuptial agreement, or obey or disobey a court’s command.

Whatever dissension there might be between a participant and a spouse is for them to sort out.

An ERISA-governed pension plan’s administrator administers the plan according to its provisions and ERISA. ERISA § 404(a)(1)(D).

If the participant submits a State court’s order, the plan’s administrator should follow ERISA § 206(d)(3) and the plan’s QDRO procedure. If the participant submits anything that might be a claim, the plan’s administrator should following ERISA § 503 and the plan’s claims procedure.

Thank-you Peter. Excellent summary of the rules.

Read these cases: 

See Hurwitz v. Sher, 982 F.2d 778 (US Ct. of Appeals, 2nd Cir.1992) at
http://scholar.google.com/scholar_case?case=1493388808681077082&q=waiver+erisa+benefits+%2Bantenuptial+marriage&hl=en&as_sdt=20000006

and Edmonds v. Edmonds, 184 Misc.2d 928?, 710 N.Y.S.2d 765 (2000) at -
http://scholar.google.com/scholar_case?case=502938691408240494&q=waiver+erisa+benefits+%2Bantenuptial+marriage&hl=en&as_sdt=20000006

and from the US 4th Circuit Court of Appeals, Hagwood v. Newton, 282 F.3d 285 (2002) at -
http://scholar.google.com/scholar_case?case=17880757291914522922&q=waiver+erisa+benefits+%2Bantenuptial+marriage&hl=en&as_sdt=20000006

See also 29 USC 1055 et seq., and Critchell v. Critchell, 746 A.2d 282 (2000),a DC case, at:
http://scholar.google.com/scholar_case?case=13503809513407550709&q=waiver+retirement+pension+benefits+antenuptial+agreement+ante-nuptial+prenuptial&hl=en&as_sdt=20000006

In Advisory Opinion No. 1999-13A , the IRS Division of Fiduciary Interpretation Office of Regulations and Interpretations was asked:
       "You have asked for an advisory opinion as to whether, and if so when, a plan administrator may investigate or question a domestic relations order submitted for review to determine whether it is a valid "domestic relations order" under State law for purposes of section 206(d)(3)(B) of ERISA."  

The response was as follows:

        "When a pension plan receives an order requiring that all or a part of the benefits payable with respect to a participant be paid to an alternate payee, the plan administrator must determine that the judgment, decree or order is a "domestic relations order" within the meaning of section 206(d)(3)(B)(ii) of ERISA — i.e., that it relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of the participant and that it is made pursuant to State domestic relations law by a State authority with jurisdiction over such matters. Additionally, the plan administrator must determine that the order is qualified under the requirements of section 206(d)(3) of ERISA. It is the view of the Department that the plan administrator is not required by section 206(d)(3) or any other provision of Title I to review the correctness of a determination by a competent State authority pursuant to State domestic relations law that the parties are entitled to a judgment of divorce. See Advisory Opinion 92-17A (Aug. 21, 1992). Nevertheless, a plan administrator who has received a document purporting to be a domestic relations order must carry out his or her responsibilities under section 206(d)(3) in a manner consistent with the general fiduciary duties in part 4 of title I of ERISA."

        "For example, if the plan administrator has received evidence calling into question the validity of an order relating to marital property rights under State domestic relations law, the plan administrator is not free to ignore that information. Information indicating that an order was fraudulently obtained calls into question whether the order was issued pursuant to State domestic relations law, and therefore whether the order is a "domestic relations order" under section 206(d)(3)(C). When made aware of such evidence, the administrator must take reasonable steps to determine its credibility. If the administrator determines that the evidence is credible, the administrator must decide how best to resolve the question of the validity of the order without inappropriately spending plan assets or inappropriately involving the plan in the State domestic relations proceeding. The appropriate course of action will depend on the actual facts and circumstances of the particular case and may vary depending on the fiduciary's exercise of discretion. However, in these circumstances, we note that appropriate action could include relaying the evidence of invalidity to the State court or agency that issued the order and informing the court or agency that its resolution of the matter may affect the administrator's determination of whether the order is a QDRO under ERISA.5(5) The plan administrator's ultimate treatment of the order could then be guided by the State court or agency's response as to the validity of the order under State law. If, however, the administrator is unable to obtain a response from the court or agency within a reasonable time, the administrator may not independently determine that the order is not valid under State law and therefore is not a "domestic relations order" under section 206(d)(3)(C), but should rather proceed with the determination of whether the order is a QDRO." 

In Brown v. Continental Airlines, Inc., 647 F. 3d 221 (5th Cir., 2011) -
https://scholar.google.com/scholar_case?case=4019345202025914766&q=brown+v.+continental+airlines&hl=en&as_sdt=20000003,  

Continental alleged that a number of pilots and their spouses obtained "sham" divorces for the purpose of obtaining lump sum pension distributions from the Continental Pilots Retirement Plan that they otherwise could not have received without the pilots' separating from their employment with Continental. The pilots were allegedly acting out of concern about the financial stability of Continental and the fear that the Plan might be turned over to the PBGC and that their retirement benefits would be substantially reduced (exactly what did happen).

 
    By getting divorced, the pilots were able to obtain QDROs from state courts that assigned 100% (or, in one instance, 90%) of the pilots' pension benefits to their respective former spouses.  The Plan provides that, upon divorce, if the pilot is at least 50 years old (as all the pilots in this case were), a former spouse to whom pension benefits are assigned can elect to receive those benefits even though the pilot continues to work at Continental.  (Think "separate interest" annuity allocation.)  The former spouses presented the QDROs to Continental and requested payment of lump-sum pension benefits.  After the former spouses received the benefits, the couples remarried.

     Continental sought to obtain restitution under ERISA Section 502(a)(3).  The Court of Appeals noted that ERISA § 206(d)(3) limits the QDRO qualification determination to whether the state court decree calls for benefit payments outside the terms of the Plan. It rejected Continental's expanded reading of § 206, concluding that plan administrators may not question the good faith intent of Participants submitting QDROs for qualification. 

 But note that DoL EBSA Advisory Opinion 13A mentioned above, dealing with "sham" divorces, was not cited in Continental.  The reason I suspect is because there is nothing in the law of most states that prevents the parties from obtaining a divorce if they have the grounds for divorce set forth in the applicable state Code, even though there may be an ulterior motive that may involve, for example, estate or tax planning, or, as in Continental, dealing with pension benefits that may be negatively impacted by the impending Bankruptcy of the Plan Sponsor.  The reciprocal is also true.  Many people remain married for a period of time in order to, for example, give the non-Military party the time necessary to obtain access to lifetime Military based health insurance under the 20/20/20 rule, or give the non-employee's spouse who is in the US pursuant to the employee's spouse's G-4 visa time to obtain a green card (especially important if they have children).

In all events the Plan Administrator must follow the instructions set forth in the QDRO submitted.  It is up to the parties to fight battles dealing with waiver in their own state courts.  

All of my Antenuptial Agreements come with an additional signature page designed to be executed after the marriage takes place.  If a party doesn't do so, he/she may be subjected to injunctive relief or a very quick suit for divorce. 

How about a letter of thanks to Congress for once again creating a trap for the parties and their attorneys\.

Ananda, we've been over some of this ground previously and I think the answer is pretty clear from the above. What is not so clear is what happens after (a) one of the spouse's dies, (b) the plan has gone ahead and, ignoring the prenup, paid the benefit to the other spouse, and then (c) the deceased's children from prior marriage, for example, sue in state court to place a constructive trust on the benefits now in the hands of the surviving spouse, on a theory that, essentially, her state law pre-nup is a contract enforceable under state law requiring surviving spouse to relinquish benefits. I think there is a lot of case law that would support the state law action as described. Again, we've been over this ground before and in a prior post, a couple of years ago, I probably cited few cases you might want to take a look at.

Many of us are asked to advise only on the retirement plan’s administration.

For equitable remedies regarding a plan’s distributee who is not the participant’s surviving spouse (or regarding money or other property distributed from a plan that need not and did not provide that a participant’s surviving spouse is the participant’s beneficiary), ERISA might not preempt a State court’s order—made after the ERISA plan has paid or delivered the plan’s benefit—that does not involve the plan or any fiduciary of it (and does not seek to interfere with a surviving spouse’s enjoyment of a survivor annuity or other ERISA § 205 benefit).

For example, Estate of Kensinger v. URL Pharma, Inc., 674 F.3d 131, 52 Empl. Benefits Cas. (BL) 2514 (3d Cir. 2012); Andochick v. Byrd, 709 F.3d 296, 56 Empl. Benefits Cas. (BL) 2865 (4th Cir. 2013); Metlife Life & Annuity Co. of Connecticut v. Akpele, 886 F.3d 998, 63 Empl. Benefits Cas. (BL) 2024 (11th Cir. 2018).

But see Melton v. Melton, 324 F.3d 941, 943–945 (7th Cir. 2003) (ERISA preempts a State-law constructive-trust remedy); Reliastar Life Ins. Co. v. Keddell, No. 09-c-1195, 2011 U.S. Dist. LEXIS 3164, 2011 WL 111733, at *3 (E.D. Wis. Jan. 12, 2011) (“A constructive trust would violate ERISA’s preemptive force even if it applied after the funds from the [plan] were actually distributed.”); Ragan v. Ragan, 2021 COA 75, 494 P.3d 664, 666 [¶ 5] (Colo. App. 2021) (“ERISA preemption extends to post-distribution lawsuits [even regarding a benefit for which ERISA § 205 does not apply, and recognizing that the plan provided the benefit to the participant’s former spouse].”) (distinguishing between after-distribution lawsuits to enforce an express waiver and lawsuits to apply a revocation-on-divorce statute).

I have seen no Federal court decision that legitimates a State court’s order that imposes a constructive trust or other equitable remedy for a surviving spouse to pay over a benefit the plan provided under ERISA § 205.

At least one State court’s decision recognized after-distribution remedies against a surviving spouse. Moore v. Moore, 297 So. 3d 359 (Ala. 2019).

However, that court did not consider whether ERISA preempts State law to preclude an after-distribution remedy that would interfere with a surviving spouse’s enjoyment of a benefit a plan provides under ERISA § 205. See Boggs v. Boggs, 520 U.S. 833, 841-844 (1997) (rejecting an argument that a State-law claim, which affected only an after-distribution disposition of proceeds, did not implicate ERISA: “The statutory object of the qualified joint and survivor annuity provisions . . . is to ensure a stream of income to surviving spouses[.] ERISA’s solicitude for the economic security of surviving spouses would be undermined by allowing a predeceasing spouse’s heirs and legatees to have a community property interest in the survivor’s annuity. It would undermine the purpose of ERISA’s mandated survivor’s annuity to allow Dorothy, the predeceasing spouse, by her testamentary transfer to defeat in part Sandra’s entitlement to the annuity [§ 205] guarantees her as the surviving spouse. This cannot be. States are not free to change ERISA’s structure and balance.”); Carmona v. Carmona, 603 F.3d 1041, 1061 (9th Cir. 2008) (“state law doctrines (including constructive trusts) may not be invoked to assign benefits to parties other than those designated as beneficiaries under ERISA.” Allowing a constructive trust to redirect a survivor annuity from the participant’s former spouse to his current spouse “would allow for an end-run around ERISA’s rules and Congress’s policy objective of providing for certain beneficiaries, thereby greatly weakening, if not entirely abrogating, ERISA’s broad preemption provision.”); see also Hillman v. Maretta, 569 U.S. 483 (June 3, 2013) (Federal law preempts State law not only about providing and paying a benefit under the Federal Employees’ Group Life Insurance Act of 1954 but also to preempt a State law that could make a payee liable to pay over a benefit she would not be entitled to if State law were not preempted.).

That Alabama case also illustrates a difficulty of after-distribution remedies. The participant’s brother/beneficiary/executor filed his lawsuit the same day he learned that the plan had (eight days before) paid the surviving spouse. The court granted a temporary restraining order about 3½ weeks later. Despite that and other courts’ orders, he “recover[ed] approximately half of the funds that [the plan] disbursed to [the surviving spouse who breached her prenuptial agreement].” Moore v. NCR Corp. Plan Admin. Comm., Civil Action No. 1:20-CV-4140-CC (N.D. Ga. Aug. 30, 2021) (finding no standing in Federal court because the plaintiff lacked even a colorable claim to challenge the administrator’s and its service provider’s conduct).

Whatever happens outside the retirement plan’s administration is (mostly) not the administrator’s worry.

Thank-you for all of your excellent suggestions and research