Discussion

The Employee Retirement Income Security Act of 1974 (29 USC § 1001 et seq.,) (ERISA) is a comprehensive Federal statute designed to promote the interests of employees and their beneficiaries in employ[ment] benefit plans ( McCoy v Feinman, __ NY2d __, n 3, 2002 NY Slip Op 08537 [Nov 19, 2002]). ERISA provides "a uniform administrative scheme, which provides a set of standard procedures to guide processing of claims and disbursement of benefits" ( Egelhoff v Egelhoff, 532 US 141, 148 [2001] quoting Fort Halifax Packing Co. v Coyne, 482 US 1, 9 [1987]). In furtherance of the goal of uniformity, ERISA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" (29 USC § 1144[a]; see also Pilot Life Ins. Co. v Dedeaux, 481 US 41, 45-46 [1987]).

A State law is related to plan administration, and thus preempted by ERISA, if the law "has a connection with or reference to such a plan" ( Shaw v Delta Air Lines, Inc., 463 US 85, 97 [1983]). Thus, where a State statute purports to designate the beneficiaries of an ERISA plan in a manner not provided under the ERISA scheme, it will be preempted ( see Egelhoff, 532 US at 148). Likewise, where a body of law traditionally reserved to the States, such as the law of testamentary transfers, alters the designation of a beneficiary in a manner inconsistent with uniform nationwide plan administration, it too will be preempted ( see Krishna v Colgate Palmolive Co., 7 F3d 11 [2d Cir 1993]).

Prior to enactment of the Retirement Equity Act of 1984 (Pub L 98 98 US Stat 1426) (REA), some courts questioned whether strict construction of ERISA's anti-alienation provision required preemption of court-ordered support obligations insofar as such orders affected ERISA plan administration ( see 29 USC § 1056[d][1]; see e.g. AT&T v Merry, 592 F2d 118 [2d Cir 1979]). REA largely settled the debate by providing an exception to the anti-alienation provisions of ERISA through the use of a qualified domestic relations order (QDRO) that meets the requirements of 29 USC § 1056(d)(3)(B)-(E) ( see 29 USC § 1056[d][3][A])[1] . In part, a QDRO is defined as a domestic relations order "which creates or recognizes the existence of an alternate payee's right to, or 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" (29 USC § 1056 [d][3][B] [i][I]). A QDRO is exempted from ERISA's preemption provisions and may be used to make dispositions of plan benefits to alternate payees ( see 29 USC § 1144[b][7]; Carland v Metropolitan Life Ins. Co., 935 F2d 1114, 1119-1120 [10th Cir 1991], cert denied 502 US 1020 [1999]). In this manner the interests of former spouses and dependent children may be balanced with those of the surviving spouse of a subsequent marriage ( see Boggs v Boggs, 520 US 833, 847 [1997]). Thus, a QDRO may serve as a plan document that changes the beneficiary designation of an ERISA- governed plan absent the filing of a plan beneficiary designation form ( see Metropolitan Life Ins. Co v Bigelow, 283 F3d 436 [2^nd Cir 2002]).

Barbara A. does not dispute that the QDRO establishing a separate annuity in her favor meets ERISA's technical requirements for exemption from preemption. She claims, however, that the QDRO failed to create a new beneficiary designation -- and indeed, the QDRO does not refer specifically to plan death benefits, nor does it name any individual as a beneficiary. Barbara K., however, claims Barbara A. waived her right to be a beneficiary of her ex-husband's death benefits when she entered into the 1998 QDRO. Unlike ERISA's authorization of designation of beneficiaries through a QDRO, the statute does not address whether, or how, a party can challenge a designated beneficiary based on a claim of waiver. Further, the Federal courts disagree as to whether ERISA even authorizes a claim of waiver.

A majority of Federal Circuit Courts of Appeal have concluded, as did the Appellate Division in the present case, that waivers of beneficiary rights are possible under ERISA- governed plans ( see e.g. Manning v Hayes, 212 F3d 866 [5th Cir 2000], cert denied 532 US 941 [2001]; Altobelli v IBM Corp., 77 F3d 78 [4th Cir 1996]; Fox Valley & Vicinity Constr. Workers Pension Fund v Brown, 897 F2d 275 [7th Cir 1990], cert denied 498 US 820 [1990] ; Lyman Lumber Co. v Hill, 877 F2d 692 [8th Cir 1989]). According to this "common law" view, the party challenging payment to the named beneficiary is permitted to show that the beneficiary executed a waiver that meets the common law requirements. Just as ERISA's anti-alienation provisions do not preempt a valid QDRO from effecting a beneficiary designation, those provisions do not prevent a valid waiver of beneficiary interests ( see Brandon v Travelers Ins. Co., 18 F3d 1321, 1324 [5th Cir 1994], cert denied 513 US 1081 [1995]).

As the Fifth Circuit noted in Manning v Hayes (212 F3d 866 [2000]), a "majority of the circuit courts to have considered the issue have recognized that ERISA does not expressly address the circumstances, if any, in which a non-beneficiary may avoid the payment of * * * benefits to the named beneficiary. For that reason, these courts have held that the issue is governed by federal common law. * * * Thus, * * * the determination of who is entitled to the proceeds of an ERISA plan providing * * * benefits may depend upon more than merely the plan documents, and may be properly defined by reference to * * * the particular facts of the case" (212 F3d at 870-871 [internal citation omitted]).

In opposition to the waiver argument, Barbara A. relies upon Egelhoff v Egelhoff (532 US 141 [2001]), and other Federal cases, claiming that ERISA requires a plan administrator to determine the intent and status of a QDRO it receives ( see 29 USC § 1056 [d][3][G][i]) and that a QDRO cannot provide for an option not otherwise provided under the plan ( see 29 USC § 1056 [d][3][D]). She argues that, based on these statutory commands, the United States Supreme Court determined that ERISA requires that a plan administrator discharge its duties solely in accordance with plan documents regardless of the variations and impact of State law.

Only one Circuit Court has unequivocally adopted Barbara A.'s position ( see McMillan v Parrott, 913 F2d 310 [6th Cir 1990]).[2] That minority view, known as the "plan document" approach, would not permit any alteration of beneficiaries in an ERISA-governed plan except those that are specifically authorized by the statute. Thus, in the minority's view, only a plan document, such as a plan-generated change of beneficiary form or a QDRO that meets ERISA requirements and expressly designates a new beneficiary, can change a beneficiary designation, and courts may not apply common law doctrines such as waiver to override an otherwise valid beneficiary designation.

As the instant case demonstrates, there are sound reasons to maintain the availability of a waiver claim, even in the area of ERISA-governed benefit plans. Strict application of ERISA requirements, while likely serving the ends of uniformity, may not serve the ends of fairness when it comes to effectuating the clear intent of parties to an agreement. Moreover, the weight of Federal authority now favors the view that a named beneficiary may waive its rights as a designated beneficiary through a waiver that meets common law requirements.

We conclude that a claim of waiver can be asserted against a designated beneficiary if the purported waiver meets certain common law requirements. In that regard, the Federal courts look to the statute itself, as well as State law consistent with the statutory scheme ( see Fox Valley & Vicinity Constr. Workers Pension Fund v Brown, 897 F2d 275, 281; Clift v Clift, 210 F3d 268, 271 [5th Cir 2000]). The Federal common law requirements for a valid waiver have been expressed as a straightforward tripartite test: the waiver must be explicit, voluntary and made in good faith ( see Manning, 212 F3d at 874). These standards are generally consistent with New York's waiver requirements in similar situations ( see e.g. Doyle v Sullivan, 176 AD2d 55 [1991]; see also Matter of Abramovich v Bd. of Ed. of Cent. Sch. Dist. 1 of the Towns of Brookhaven and Smithtown, , 46 NY2d 450, 455 [1979], cert denied 444 US 845 [1979]).

We agree with the Appellate Division that, as a whole, the QDRO agreement effectuated a sufficiently specific waiver of Barbara A.'s rights to death benefits. Besides waiving rights against each other and their respective estates, the parties also agreed, in paragraph 3, that ownership of the newly created annuities would belong to Barbara A. exclusively, while all rights and interests in the remaining accumulations would belong to Silber. In addition, the QDRO states that it supersedes all prior orders, which includes the prior divorce judgment that required designation of Barbara A. as a 50% beneficiary of the death benefits. Any other rights of the parties arise solely under the 1998 QDRO. Finally, the QDRO creates a mutual waiver of claims between Barbara A. and Barbara K. Taken together, the various provisions of this agreement evince an understanding among the parties that the creation of a new annuity in favor of Barbara A., an annuity amounting to 45% of all accumulations -- close to one million dollars -- supersedes all prior agreements.

There is little question that the agreement was entered into voluntarily by all parties. Barbara A.'s attorney contacted Silber's representatives with the idea of entering into a new arrangement. The parties had divorced in 1985 and 13 years had elapsed. Silber had remarried and was still working. Barbara A. sought a present distribution rather than waiting for her ex- husband's retirement or death. Moreover, as she conceded at a deposition, she did not expect to be a beneficiary of Silber's pension plans after the creation of her own, separate annuity under the agreement. Finally, all three parties to the QDRO agreement were represented by counsel and there is no record evidence to indicate that any of them were acting in anything other than good faith.

Application of the tripartite common law test to the parties' agreement contained in the 1998 QDRO demonstrates that Barbara A. Silber executed an explicit, voluntary and good faith waiver of all beneficial interests under her ex-husband's TIAA- CREF plan. Thus, she waived her right to receive the death benefits upon the filing and acceptance of the QDRO, a plan document, by the plan administrator.

Silber's four children also appeal the decision of the Appellate Division. The children argue that, in the event their mother, Barbara A., is deemed to have waived her death benefits, they should be entitled to a share of the benefits based on their status as contingent beneficiaries. This position is defeated by the clear language of the TIAA-CREF contracts.

With respect to priority of beneficiaries, the TIAA- CREF plan provisions state that, in order for members of a contingent class of beneficiaries to receive benefits, there must be no beneficiary living in a prior class. Thus, where there are two named primary beneficiaries, the absence of one such beneficiary through death, or in this case waiver, means the other primary beneficiary succeeds to the benefits as the remaining primary. The contingent beneficiaries do not take unless there is no one left in the primary beneficiary class. Silber's last two beneficiary designations of May and June 1993, along with an internal TIAA-CREF memorandum, make clear that the children were designated as contingent beneficiaries. Thus, the effect of Barbara A's waiver of her beneficiary designation is to leave Barbara K. as the sole beneficiary.

Accordingly, the order of the Appellate Division should be affirmed, with costs.