Court Denies Ex-Wife's Waiver of Benefits

September 16, 2005 ( - The US 3rd Circuit Court of Appeals decided that a retiree could not change his surviving spouse election even after she signed a waiver of benefits in their divorce settlement.

According to BNA, Circuit Judge Franklin Van Antwerpen said in the court opinion that plan administrators’ duty under ERISA is to run the plan “in accordance with the documents and instruments governing the plan.”   Van Antwerpen said the administrators could not look beyond plan documents to determine if a spouse had waived his or her right to survivor benefits.

Van Antwerpen also said that recognizing the waiver would violate ERISA’s anti-alienation provision, according to BNA.   He stated that McGowan was attempting to use the waiver as a “functional equivalent of an assignment of benefits from his former wife to his current wife,” where the waiver was instead an “indirect arrangement” to eventually transfer benefits to his new wife.   He pointed out that changing the payee by any arrangement other than a Qualified Domestic Relations Order (QDRO) would violate the anti-alienation provision.  

But, in a dissenting opinion, Circuit Judge Julio Fuentes said that both ERISA and the plan document were silent on the enforcement of waivers of benefits, so, “federal common law ought to fill this gap by respecting the time-honored principle of state autonomy in the domestic law area.”  

BNA reports that when James McGowan retired from New Jersey Natural Gas Co. in 1996, he elected to receive his benefits in the form of a Joint & Survivor Annuity, naming his second wife, Rosemary Byrne, as his survivor.   This created a 50% survivor annuity for Byrne.

In 1999, the couple divorced, and as part of the marital settlement Byrne agreed to waive her interest in McGowan’s benefits.   She signed a form consenting to the election of McGowan’s first wife as the new survivor.

In 2001, McGowan attempted to change his survivor designation to his new wife, but the administrator denied the attempt, saying the plan did not permit a change to beneficiary elections once payments had already started.

According to BNA, McGowan filed suit with the US District Court for the District of New Jersey to get New Jersey Natural Gas to recognize Byrne’s waiver of benefits and his new election for his survivor.   The court granted summary judgment for the plan saying it was not required to recognize the waiver.

The case is McGowan v. NJR Service Corp., 3d Cir., No. 04-3620, 9/13/05.