Graef v. Retirement Income Plan for Employees of Albemarle Corp., et. al., 1998 U.S. App. LEXIS 31582 (4th Cir. 1998) – decided December 17, 1998 – United States Court of Appeals for the Fourth Circuit – Robert E. Hoskins

I represented Graef.  Graef was a “interesting” case.  It was a different type of case for me at the time.  In the years since, I have actually had similar situations come up frequently, but back in 1997 when I filed suit, I had not yet experienced such a fact situation.  Graef involved a dispute over ERISA pension death benefits between a widow and the decedent’s children from another marriage.  I had the widow.  Actually, I was successful in convincing the district court that the plan’s claim decision was wrong, but I still lost the case.  The plan denied my client’s claim asserting that she was not even married to the decedent.  The district court held otherwise and found that the parties were married under South Carolina law at the time of the decedent’s death.  However, the district court held that Graef had waived her claim to the benefits when she instituted a divorce proceeding in South Carolina Family Court.  (Click here to see the district court decision.)

I appealed the district court decision.  The plan continued to argue, on appeal, that my client and the decedent were not married.  The Fourth Circuit, like the district court, ruled with me and found that the plan’s decision that the parties were not married was flawed.  The court held that the parties were married at the time of the decedent’s death.  However, like the district court, the Fourth Circuit held that my client waived her right to the benefits by instituting the divorce action.  The court stated:

“Graef next argued that, as a surviving spouse, her waiver of rights to benefits under the Plans is governed by a specific ERISA provision, rather than federal common law.  Graef further argues that she did not waive her rights to benefits under the Plans by instituting a family court action and by not appealing from the resulting family court order dividing marital property because that order did not meet the ERISA requirements for waiver set out in 29 U.S.C.A. § 1055(c)(2)(A) (West Supp. 1998). 

The Retirement Equity Act (REA), 98 Pub. L. No. 98-397, 98 Stat. 1426 (1984), amended ERISA “to ensure that a participant’s spouse receives survivor benefits from a retirement plan even if the participant dies before reaching retirement age.”  Hurwitz v. Sher, 982 F.2d 778, 781 (2d Cir. 1992).  ERISA, as amended, provides that each pension plan to which 29 U.S.C. § 1055 applies shall provide a “qualified pre-retirement survivor annuity” to the surviving spouse of a plan participant.  29 U.S.C.A. § 1055(a)(2) (West Supp. 1998).  The object of the surviving-spouse annuity, and the rest of § 1055, “is to ensure a stream of income to surviving spouses.”  Boggs v. Boggs, 520 U.S. 833, 117 S. Ct. 1754, 1761, 38 L.Ed.2d 45 (1997).

ERISA states that “a plan meets the requirements of this section only if under the plan, each participant may elect at any time during the applicable election period to waive the . . . qualified preretirement survivor annuity form of benefit.”  29 U.S.C.A. § 1055(c)(1)(A)(i) (West Supp. 1998).  ERISA further provides that a participant’s waiver of benefits shall not take effect unless 

(i) the spouse of the participant consents in writing to such election, (ii) such election designates a beneficiary (or a form of benefits) which may not be changed without spousal consent (or the consent of the spouse expressly permits designations by the participant without any requirement of further consent by the spouse), and (iii) the spouse’s consent acknowledges the effect of such election and is witnessed by a plan representative or a notary public.

29    US.C.A. § 1055(c)(2)(A) (West Supp. 1998).  The clear objective of this section is to protect surviving spouses by requiring of them an informed waiver.  In order to effect a valid waiver, a participant must obtain his or her spouse’s consent in writing before a notary public or plan representative, the waiver must designate an alternative beneficiary, and the spouse’s consent must acknowledge the effect of the waiver. 

• • •

Albemarle argues, and the district court agreed, that this case is not governed by ERISA, but by federal common law.  If ERISA does not address an issue directly, “federal courts may resolve it by developing federal common law.”  Estate of Altobelli v. IBM, 77 F.3d 78, 80 (4th Cir. 1996).  Albemarle relies on the recent decision of this Court in Altobelli, which held that a participant’s former spouse, who was the designated beneficiary under her ex-husband’s ERISA plan, can waive her benefits through specific language in a martial settlement agreement that is incorporated into a divorce degree.  Id. at 80-81; see also Mohamed v. Kerr, 53 F.3d 911, 914 (8th Cir. 1995); Brandon v. Travelers Ins. Co., 18 F.3d 1321, 1327 (5th Cir. 1994); Fox Valley & Vicinity Constr. Workers Pension Fund v. Brown, 897 F.2d 275, 280-81 (7th Cir. 1990) (en banc).  The Altobelli court concluded that because the purpose of ERISA’s anti-alienation clause was to ensure pensioners a steady stream of income, “to bar a waiver in favor of the pensioner himself would not advance that purpose.”  77 F.3d at 81.  Albemarle argues that because Graef is a nonparticipant spouse, this case falls squarely under the holding of Altobelli, and Graef waived her claim to benefits under the Plan by not appealing the family court order dividing the marital property. 

• • •

Graef argues that Altobelli is distinguishable from this case because Altobelli involved a former spouse who claimed a right to benefits of her ex-husband’s pension plan and insurance plan as a designated beneficiary, while Graef claims a right to benefits under the Plans as a surviving spouse.  Graef argues that her status as a surviving spouse brings her under the coverage of ERISA, and specifically, 29 U.S.C.A. § 1055.  By its plain language, however, § 1055 applies only to a waiver of a spouse’s benefits by a participant; it does not cover a waiver of a spouse’s benefits by the spouse, absent an election by the participant to waive.  The participant in the Plans was Kirby.  Neither party in this case alleges that Kirby effected a waiver of Graef’s benefits under the Plans by being a defendant in the family court action. 

• • •

Because ERISA, by its terms, does not cover the waiver of benefits by a spouse, the district court properly resorted to federal common law in deciding this case.  We agree with the district court that our holding in Altobelli governs this case even though this case involves a waiver of benefits by a spouse via a judicial order rather than a wavier of benefits by a former spouse via a voluntary property settlement between the parties.  We believe that Altobelli stands for the proposition that a nonparticipant beneficiary can waive rights to benefits in an ERISA plan where that individual demonstrates a clear intent “to relinquish all interests” in the plan through a specific and voluntary waiver.  See Altobelli, 77 F.3d at 81; see also Fox Valley, 897 F.2d at 280-81.  The family court’s division of the marital property was sufficiently specific to constitute a waiver by Graef of benefits under the Plans because it expressly transferred to Kirby his “retirement account at Ethyl”.  It was also the product of a knowing and considered decision by Graef, who initiated the family court action and did not appeal from the ruling therein.  The district court therefore properly concluded that Graef waived her rights to benefits under the Plans. 

(Click here to see the entire Fourth Circuit decision.)

Graef is a case that I have looked at a number of times over the ensuing years because of the frequency with which similar circumstances arise.  Actually, I settled a very large case in 2007 based primarily on the holding in Graef.  In the 2007 case, I represented the children rather than the widow.