ERISA monthly annuity may be docked for ex-spouse payment, 4th Circuit says

A retirement plan administrator correctly interpreted the language of the plan when it reduced a former employee’s monthly annuity payment to cover the cost of the “qualified joint survivor annuity,” the 4^th U.S. Circuit Court of Appeals has ruled, affirming the district court.

In 2010, David Gasper and his spouse divorced after 25 years of marriage. In the divorce, Gasper’s employee retirement plan, sponsored by his employer EIDP, Inc. was deemed a marital asset.

The state court entered a domestic relations order (DRO) which adopted an agreement between the parties regarding certain marital property rights. Under the terms of the DPO, Gasper would receive a monthly annuity payment upon retirement for his lifetime, and his former spouse would receive a reduced monthly annuity payment during Gasper’s lifetime.

According to the DRO, Gasper’s former spouse’s “benefit may be reduced as necessary to cover the cost of the [surviving spouse annuity] awarded to” Gasper.

In April 2013, the plan sponsor provided Gasper a determination report, stating that that plan would distribute benefits to his former spouse “in accordance with the [DRO] and Plan terms,” and that on Gasper’s benefit commencement date, “the total monthly benefit will be reduced to cover the cost associated with the” annuity to his former spouse.

Six years later, Gasper became eligible to receive retirement benefits and was informed that his monthly benefit would be $3,400.

Gasper objected, arguing that his monthly benefit should be $3,785.26, as required under the terms of the qualified domestic relations order (QDRO). The plan administrator denied the appeal.

In 2023, Gasper sued EIDP and the plan administrator under the Employee Retirement Income Security Act (ERISA), alleging wrongful denial of benefits and a claim for statutory damages for failure to produce documents as required by the statute.

On cross motions for summary judgment, the district court sided with the defendants.  Gasper appealed.

Writing for the panel in Gasper v. EIDP, Inc., Judge Barbara Milano Keenan affirmed.

Although the 4th Circuit has not directly addressed the proper standard of review, the court agreed with the district court that de novo review of a plan administrator’s interpretation of a QDRO adopting the terms of a DRO entered by a state court was the appropriate standard.

“As recognized by our two sister circuits addressing this issue, a plan administrator’s special expertise in interpreting plan provisions, which warrants application of an abuse of discretion standard in reviewing such decisions, does not extend to the interpretation of a state court order memorializing the parties’ agreement,” the court wrote, citing decisions from the 3rd and 5th Circuits. “Instead, the QDRO is a court-approved contract between the parties and, therefore, is subject to ordinary rules of contract interpretation under state law. So, we review de novo the language of the QDRO. And we apply an abuse of discretion standard to the plan administrator’s exercise of discretionary authority under the plan to make calculation determinations for plan beneficiaries.”

Gasper argued that under the terms of the QDRO, he and his former spouse agreed that she would bear the cost of the surviving spouse annuity, and that the use of the word “may” rendered the provision ambiguous, suggesting that the district court should have examined extrinsic evidence of the parties’ intent for support.

But the court disagreed.

“Here, the district court concluded that the language of the QDRO was unambiguous, and we agree,” the court said. “Considering the QDRO as a whole, we conclude that the language stating that ‘the alternate payee’s benefit may be reduced as necessary to cover the cost’ of the surviving spouse annuity authorizes, but does not require, the plan administrator to allocate the cost of the surviving spouse annuity to the alternate payee’s portion of the benefit.”

The QDRO’s structure and wording compelled this conclusion, the court said, because mandatory obligations throughout the document were denoted by the word “shall.” In contrast, the QDRO did not provide that the alternate payee’s benefit “shall” be reduced to cover the cost of the surviving spouse annuity.

Instead, the QDRO stated that her portion of the benefit “may be reduced as necessary” to bear that cost.

“Therefore, we conclude that the disputed terms in the QDRO are unambiguous,” the court held. Accordingly, the plan administrator did not misapply the QDRO’s terms when she issued her determination report and her “understanding of the QDRO thus was consistent with both the QDRO’s plain language and the plan’s terms governing the cost of the surviving spouse annuity.”

The court also rejected Gasper’s contention that he was entitled to statutory penalties based on the plan administrator’s failure to timely provide certain plan documents as required by ERISA.

A plan administrator who fails to comply with a plan participant’s request for documents within 30 days “may in the court’s discretion be personally liable” to the participant up to $100 per day.

In exercising its discretion, a court may evaluate whether the participant was prejudiced by the failure to provide the requested plan documents and may further consider the nature and adequacy of the plan administrator’s response to the participant’s request.

The plan administrator initially responded to Gasper’s verbal request for documents (although the statute does not obligate a response unless the request is made in writing), and timely responded to Gasper’s two written requests.

In addition, the court observed that Gasper ultimately received all requested documents after filing his lawsuit and had not identified any prejudice resulting for his delayed receipt of certain documents.

“We therefore conclude that the district court did not abuse its discretion in declining to impose statutory penalties,” the court wrote.

Judges DeAndrea Gist Benjamin and Nicole G. Berner joined the opinion.

Bryson L. Tyson of Marcellino & Tyson in Charlotte, who represented Gasper, did not respond to a request for comment on the decision.

Neither did Atlanta attorney Todd D. Wozniak of Holland & Knight, who represented the defendants.