Ex-husband fails to impose Constructive Trust on ex-wife’s Survivor Annuity

ERISA entitles certain spouses of pension plan participants to a survivor annuity unless waived to clearly defined procedures.

In the case of Vanderkam v. Vanderkam, 2015 No. 13-5163 United States Court of Appeals for the District of Columbia Circuit opined that the pension plan participant concedes that ERISA vested an annuity in his ex-wife, but nonetheless argues that Texas State Law inclusive of his divorce decree requires entry now of a declaratory judgment that after the death of the plaintiff she places her annuity payments into a constructive trust for his benefit. The District Court rejected the claim holding that ERISA preempts any State law or State Court decree that would otherwise defeat the Spouse’s vested annuity, and based on the District Court’s holding the Circuit Court affirmed its opinion.

In this case the conflict was raised upon the State Community property law and ERISA. John was enrolled in the Huffy Corporation retirement plan when he was married to Melissa in 1984. He made her beneficiary of 100% qualified joint and survivor annuity. John retired in 1994 and divorced Melissa in 2002, while agreeing to a decree awarding John “all benefits existing by reason of John’s past, present or future employment.”

A year later John remarried and he further sought to make his current wife the beneficiary. Counsel for Huffy’s pension plan advised John that this designation would be permissible if done pursuant to a Qualified Domestic Relations Order (QDRO) that, in accordance with ERISA, did not require the plan to increase benefits beyond actuarial estimates of John’s and Melissa’s life expectancies. To meet up with the requirements John moved to a Texas Court to modify the divorce decree which was opposed by Melissa. She argued that her primary motive of proceeding to divorce was that the survivor annuity belonged to her and was therefore entirely separate from John’s retirement benefits.  Texas Court rejected Melissa arguments and modified the decree in favor of John.

In 2005 Huffy terminated its pension plan, and Pension Benefit Guarantee Corporation (PBGC) stepped up as the plan’s statutory trustee. Reviewing John’s file, PBGC concluded that Texas QDRO was invalid and in addition to that John did not obtain a written waiver of her rights in the annuity as required by ERISA section 205. PBGC notified Melissa’s right to survivor annuity. John filed a suit in the Federal District Court for the District of Columbia where John stated that under Texas family law he had equitable rights in the survivor annuity payments and she had a fiduciary obligation to hold such payments under constructive trust from which they could then be paid to his second wife. The district court ruled for Melissa and denied the constructive trust which was further affirmed by the United States Court of Appeals for the District of Columbia Circuit on account of further appeal made by John.

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