Egelhoff v Egelhoff

532 U.S. 141

121 S.Ct. 1322

149 L.Ed.2d 264

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press

DONNA RAE EGELHOFF, PETITIONER v SAMANTHA EGELHOFF, a minor, by and through her natural parent KATE BREINER, and DAVID EGELHOFF

No. 99-1529

SUPREME COURT OF THE UNITED STATES

Argued November 8, 2000

Decided March 21, 2001

Syllabus

While David A. Egelhoff was married to petitioner, he designated her as the beneficiary of a life insurance policy and pension plan provided by his employer and governed by the Employee Retirement Income Security Act of 1974 (ERISA). Shortly after petitioner and Mr. Egelhoff divorced, Mr. Egelhoff died intestate. Respondents, Mr. Egelhoff's children by a previous marriage, filed separate suits against petitioner in state court to recover the insurance proceeds and pension plan benefits. They relied on a Washington statute that provides that the designation of a spouse as the beneficiary of a nonprobate asset-defined to include a life insurance policy or employee benefit plan-is revoked automatically upon divorce. Respondents argued that in the absence of a qualified named beneficiary, the proceeds would pass to them as Mr. Egelhoff's statutory heirs under state law. The trial courts concluded that both the insurance policy and the pension plan should be administered in accordance with ERISA, and granted petitioner summary judgment in both cases. The Washington Court of Appeals consolidated the cases and reversed, concluding that the statute was not pre-empted by ERISA. The State Supreme Court affirmed, holding that the statute, although applicable to employee benefit plans, does not "refe[r] to" or have a "connection with" an ERISA plan that would compel pre-emption under that statute.

Held: The state statute has a connection with ERISA plans and is therefore expressly pre-empted. Pp. 4-10.

(a) ERISA's pre-emption section, 29 U.S.C. 1144(a), states that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by ERISA. A state law relates to an ERISA plan "if it has a connection with or reference to such a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97. To determine whether there is a forbidden connection, the Court looks both to ERISA's objectives as a guide to the scope of the state law that Congress understood would survive, as well as to the nature of the state law's effect on ERISA plans. California Div. of Labor Standards Enforcement v. Dillingham Constr., N. A., Inc., 519 U.S. 316, 325. Applying this framework, the state statute has an impermissible connection with ERISA plans, as it binds plan administrators to a particular choice of rules for determining beneficiary status. Administrators must pay benefits to the beneficiaries chosen by state law, rather than to those identified in the plan documents. The statute thus implicates an area of core ERISA concern, running counter to ERISA's commands that a plan shall "specify the basis on which payments are made to and from the plan," 1102(b)(4), and that the fiduciary shall administer the plan "in accordance with the documents and instruments governing the plan," 1104(a)(1)(D). The state statute also has a prohibited connection with ERISA plans because it interferes with nationally uniform plan administration. Administrators cannot make payments simply by identifying the beneficiary specified in the plan documents, but must familiarize themselves with state statutes so that they can determine whether the named beneficiary's status has been "revoked" by operation of law. The burden is exacerbated by the choice-of-law problems that may confront an administrator when the employer, the plan participant, and the participant's former spouse live in different States. Although the Washington statute provides protection for administrators who have no actual knowledge of a divorce, they still face the risk that a court might later find that they did have such knowledge. If they instead decide to await the results of litigation among putative beneficiaries before paying benefits, they will simply transfer to the beneficiaries the costs of delay and uncertainty. Requiring administrators to master the relevant laws of 50 States and to contend with litigation would undermine the congressional goal of minimizing their administrative and financial burdens. Differing state regulations affecting an ERISA plan's system for processing claims and paying benefits impose precisely the burden that ERISA pre-emption was intended to avoid. Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 10. Pp. 4-8.

(b) Respondents' reasons why ordinary ERISA pre-emption analysis should not apply here-that the state statute allows employers to opt out; that it involves areas of traditional state regulation; and that if ERISA pre-empts this statute, it also must pre-empt the various state statutes providing that a murdering heir is not entitled to receive property as a result of the killing-are rejected. Pp. 8-10.

139 Wash. 2d 557, 989 P.2d 80, reversed and remanded.

ON WRIT OF CERTIORARI TO THE SUPREME COURT OF WASHINGTON

Thomas, J., delivered the opinion of the Court, in which Rehnquist, C. J., and O'Connor, Scalia, Kennedy, Souter, and Ginsburg, JJ., joined. Scalia, J., filed a concurring opinion, in which Ginsburg, J., joined. Breyer, J., filed a dissenting opinion, in which Stevens, J., joined. Opinion of the Court

Justice Thomas delivered the opinion of the Court.

A Washington statute provides that the designation of a spouse as the beneficiary of a nonprobate asset is revoked automatically upon divorce. We are asked to decide whether the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 832, 29 U.S.C. 1001 et seq., pre-empts that statute to the extent it applies to ERISA plans. We hold that it does.

I

Petitioner Donna Rae Egelhoff was married to David A. Egelhoff. Mr. Egelhoff was employed by the Boeing Company, which provided him with a life insurance policy and a pension plan. Both plans were governed by ERISA, and Mr. Egelhoff designated his wife as the beneficiary under both. In April 1994, the Egelhoffs divorced. Just over two months later, Mr. Egelhoff died intestate following an automobile accident. At that time, Mrs. Egelhoff remained the listed beneficiary under both the life insurance policy and the pension plan. The life insurance proceeds, totaling $46,000, were paid to her.

Respondents Samantha and David Egelhoff, Mr. Egelhoff's children by a previous marriage, are his statutory heirs under state law. They sued petitioner in Washington state court to recover the life insurance proceeds. Respondents relied on a Washington statute that provides:

"If a marriage is dissolved or invalidated, a provision made prior to that event that relates to the payment or transfer at death of the decedent's interest in a nonprobate asset in favor of or granting an interest or power to the decedent's former spouse is revoked. A provision affected by this section must be interpreted, and the nonprobate asset affected passes, as if the former spouse failed to survive the decedent, having died at the time of entry of the decree of dissolution or declaration of invalidity." Wash. Rev. Code 11.07.010(2)(a) (1994).

That statute applies to "all nonprobate assets, wherever situated, held at the time of entry by a superior court of this state of a decree of dissolution of marriage or a declaration of invalidity." 11.07.010(1). It defines "nonprobate asset" to include "a life insurance policy, employee benefit plan, annuity or similar contract, or individual retirement account." 11.07.010(5)(a).

Respondents argued that they were entitled to the life insurance proceeds because the Washington statute disqualified Mrs. Egelhoff as a beneficiary, and in the absence of a qualified named beneficiary, the proceeds would pass to them as Mr. Egelhoff's heirs. In a separate action, respondents also sued to recover the pension plan benefits. Respondents again argued that the Washington statute disqualified Mrs. Egelhoff as a beneficiary and they were thus entitled to the benefits under the plan.

The trial courts, concluding that both the insurance policy and the pension plan "should be administered in accordance" with ERISA, granted summary judgment to petitioner in both cases. App. to Pet. for Cert. 46a, 48a. The Washington Court of Appeals consolidated the cases and reversed. In re Estate of Egelhoff, 93 Wash. App. 314, 968 P.2d 924 (1998). It concluded that the Washington statute was not pre-empted by ERISA. Id., at 317, 968 P.2d, at 925. Applying the statute, it held that respondents were entitled to the proceeds of both the insurance policy and the pension plan. Ibid.

The Supreme Court of Washington affirmed. 139 Wash. 2d 557, 989 P.2d 80 (1999). It held that the state statute, although applicable to "employee benefit plan[s]," does not "refe[r] to" ERISA plans to an extent that would require pre-emption, because it "does not apply immediately and exclusively to an ERISA plan, nor is the existence of such a plan essential to operation of the statute." Id., at 574, 989 P.2d, at 89. It also held that the statute lacks a "connection with" an ERISA plan that would compel pre-emption. Id., at 576, 989 P.2d, at 90. It emphasized that the statute "does not alter the nature of the plan itself, the administrator's fiduciary duties, or the requirements for plan administration." Id., at 575, 989 P.2d, at 90. Nor, the court concluded, does the statute conflict with any specific provision of ERISA, including the antialienation provision, 29 U.S.C. 1056(d)(1), because...