The Employee Retirement Income Security Act of 1974 (“ERISA”) requires that a qualified survivor annuity be provided to the surviving spouse of a participant in an employee pension benefit plan.
To waive his or her rights to such benefits, the spouse of a participant must consent in writing to an alternative beneficiary designation. According to ERISA and the cases interpreting it, such written consent is invalid unless it strictly complies with certain requirements, one of which is that a notary public or a plan representative witness the consent’s execution by the participant’s spouse.
Importantly, the Plan and the Form also require that the Consent’s execution be properly notarized in order to be valid.
Issue 1: Can a purported notarization by someone who is not a notary or plan representative satisfy the requirement by both ERISA and the Plan that the Consent be properly notarized or witnessed by a plan representative?
Issue 2: If the Consent does not satisfy the requirement by both ERISA and the Plan that it be properly notarized or witnessed by a plan representative, is the Form a valid alternative beneficiary designation?
Issue 3: If the Form is not a valid consent to an alternative beneficiary designation, is the spouse the proper recipient of benefits under the Plan?
Issue 4: Did employer commit an abuse of discretion when it denied the spouse's application for benefits despite clear, uncontroverted evidence that the Consent was not properly notarized or witnessed by a plan representative?
SUMMARY JUDGMENT STANDARD
Under ERISA, a plan administrator must make two general determinations to decide whether a claimant is entitled to benefits: (1) it must ascertain the facts underlying the claim; and (2) it must determine whether those facts entitle the claimant to benefits under the terms of the plan. Courts always review the administrator’s findings of fact under an “abuse of discretion” standard. And when, as in the present matter, the plan expressly confers discretion on the administrator to construe the plan’s terms, courts review the administrator’s interpretation for “abuse of discretion.”
In reviewing a plan administrator’s interpretation and application of the plan language, courts in the Fifth Circuit apply a two-step analysis. The first step is to determine whether the plan administrator’s interpretation and application of the plan was legally correct; if it is, there can be no abuse of discretion. If the interpretation and application was not legally correct, then the second step is to decide whether the administrator’s decision was an abuse of discretion.
With the foregoing in mind, a court should grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.
ANALYSIS AND AUTHORITY
ERISA requires that a qualified joint and survivor annuity or qualified preretirement survivor annuity be provided to the spouse of a participant in an employee pension benefit plan. A participant’s spouse can waive this benefit only by complying with ERISA’s requirements. Pursuant to ERISA, such a waiver is ineffective unless:
- the spouse of the participant consents in writing to an alternative benefit designation (election);
- the election designates a beneficiary or form of benefit that 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);
- the spouse’s consent acknowledges the effect of such election; and
- the consent is witnessed by a plan representative or notary public.
In keeping with ERISA’s clear language, courts consistently have held that “[a]ny waiver of retirement benefits by a spouse must strictly comply with the consent requirements set forth in ERISA.” Importantly, the Plan and the Form, together, also require that the execution of the Consent be properly notarized.
In Texas, a notary public is commissioned to a four-year term that begins on the date the notary qualifies under Chapter 406 of the Texas Government Code. If a notary wishes to renew his/her commission, (s)he must file an application, and the Secretary of State must receive that application prior to the expiration of the notary’s current commission. Upon receipt of the application, the Secretary of State determines eligibility for renewal according to the same standards as initial applicants. Unless the Secretary of State renews the commission, a person ceases being a notary at the expiration of his/her term, and, in fact, the Secretary of State advises such a person to destroy his/her notary seal.
It is axiomatic that an individual who is not a notary cannot notarize a document. Consequently, the Consent was not, in fact, notarized. And it certainly was not properly notarized, as required by the Form’s plain language and ERISA’s strict requirements.
II. BECAUSE THE CONSENT WAS NOT PROPERLY NOTARIZED OR WITNESSED BY A PLAN REPRENTATIVE, IT IS NOT A VALID WAIVER OF BENEFITS UNDER THE PLAN AND THE FORM IS NOT A VALID ALTERNATIVE BENEFICIARY DESIGNATION.
The Consent and Form are invalid because the Consent does not satisfy the Plan’s Requirements.
According to the Fifth Circuit, “ERISA plans are to be administered according to their controlling documents” and “[e]ligibility for benefits under any ERISA plan is governed in the first instance by plain meaning of the plan language.” This is in conformity with ERISA, which states that an ERISA plan fiduciary shall discharge his duties with respect to the plan in accordance with the documents and instruments governing the plan.
In the present case, the Form repeatedly advises that it governs the beneficiary designation for benefits under the Plan. It also provides clear, unambiguous instructions on what is required in order for the Consent to be a valid waiver of spousal benefits. For instance, at the bottom of the “Beneficiary Information” box, the Form states, “Note: Under the Plan(s), if you are married your primary beneficiary is automatically your spouse unless your spouse executes the notarized consent below.” And in “Section 4: Spousal Consent,” the form states, “If you are married and your spouse is not designated as the only primary beneficiary above, your spouse must sign this box and the signature must be properly notarized.” Further, the instructions accompanying the Form state,
The language of the Form and the SPD is clear and leaves no ambiguity. A beneficiary’s spouse automatically is the sole primary beneficiary of Plan benefits unless: (1) the spousal consent to an alternative beneficiary designation is signed by the beneficiary’s spouse; and (2) the spouse’s signature is properly notarized. The SPD and the Form repeatedly advise the reader of these two separate requirements.
- The Consent and Form also are invalid because the Consent does not satisfy the requirements of 29 U.S.C. § 1055(c)(2)(A).
In addition to complying with the Plan’s requirements, a spousal waiver of pension benefits (such as the Consent purports to be) also must strictly comply with ERISA’s requirements in order to be valid. In 29 U.S.C. § 1055(c)(2)(A), Congress “explicitly set forth certain requirements that must be followed.” Embodied in these requirements is “the public policy of protecting spouses’ rights to spousal retirement benefits.” “Thus, these strict ERISA requirements were designed to ensure a valid waiver of a spouse’s retirement plan are consistent with the legislative policy of protecting spousal rights.” Therefore, “any waiver of retirements [sic] benefits by a spouse must strictly comply with the consent requirements set forth in ERISA.”
Among the requirements for a waiver of retirement benefits by a beneficiary’s spouse are: (1) the requirement that the spouse of the participant consent in writing to an alternative benefit designation; and (2) the separate requirement that a plan representative or notary public witness the consent. Importantly, a person’s subjective intent is irrelevant to whether these requirements were followed.” Thus, a purported spousal waiver of pension benefits, even one that the waiving spouse acknowledges signing, is not valid unless it is witnessed by a plan representative or notary public. Consequently, unless a spousal wavier of retirement benefits is witnessed by a plan representative or notary public, it will fail as a matter of law.
III. IN THE ABSENCE OF A VALID ALTERNATIVE BENEFICIARY DESIGNATION AND WAIVER OF BENEFITS UNDER THE PLAN, MOVANT IS THE PROPER RECIPIENT OF BENEFITS UNDER THE PLAN.
According to both the SPSD and the Form, unless Movant signed the Consent and Movant’s signature was properly notarized, Movant automatically is the primary beneficiary under the Plan. ERISA also mandates that Movant is the primary beneficiary under the Plan unless she executes a waiver that strictly complies with ERISA’s waiver requirements. As such, a surviving spouse is the proper recipient of a deceased spouse’s retirement plan benefits unless the surviving spouse consents, in accordance with the requirements and the Plan, to another named beneficiary.
ERISA and the Plan leave no room for ambiguity on this issue. Because Movant’s signature on the Consent was not properly notarized, the Consent did not strictly comply with the explicit requirements of both ERISA and the Plan. Therefore, as a matter of law, the Consent is invalid, the Form is ineffective, and Movant automatically is the proper recipient of plan benefits under the Plan.
Therefore, the focus of the abuse of discretion analysis is employer’s interpretation and application of the Plan. For this analysis, the Fifth Circuit uses a two-step inquiry. The first step is to ascertain if the administrator’s interpretation was legally correct. If the interpretation was not legally correct, the second step is to decide whether the administrator’s decision was an abuse of discretion.
There are three factors to consider when determining whether an interpretation is legally correct: (1) whether the administrator has given the plan a uniform construction; (2) whether the interpretation is consistent with a fair reading of the plan; and (3) any unanticipated costs resulting from different interpretations of the plan. Of these, the most important factor “is whether the administrator’s interpretation was consistent with a fair reading of the plan.”