In re Estate of Egelhoff

989 P.2d 80

139 Wash.2d 557

In the Matter of the ESTATE OF David A. EGELHOFF, Deceased;

Samantha Egelhoff, a minor by and through her natural parent Kate Breiner; and David Egelhoff, a single person, Respondents, v. Donna Rae Egelhoff and John Doe Egelhoff, wife and husband, Petitioners.

No. 67626-7.

Supreme Court of Washington, En Banc.

Argued October 14, 1999.

Decided November 18, 1999.

Bruce Corker, Kurt Linsenmayer, Seattle, Amicus Curiae on Behalf of Boeing Company, Boeing Company Employee Benefit Plan, Puget Sound Energy, Inc., Safeco Corporation, Weyerhaeuser Company.

Rochelle Kleinberg,, Seattle, W. IrisBarber, Alexander Fernandez, Plan Benefits Security Division, Washington, D.C., Amicus Curiae on Behalf of Secretary of Labor.

Debra Stephens, Bryan Harnetiaux, Spokane, Amicus Curiae on Behalf of Washington State Trial Lawyers Association Foundation.

Mark Brennan, Seattle, Terence Craig, Brian Black, Alexandria, Amicus Curiae on Behalf of Sheet Metal Workers' National Pension.

Henry Haas, Tacoma, for Petitioners.

Michael Jordan, Tacoma, for Respondents.

SMITH, J.

Petitioner Donna Rae Egelhoff, recently divorced former spouse of Decedent David A. Egelhoff, seeks review of a decision of the Court of Appeals, Division II, which reversed orders of summary judgment granted by the Pierce County Superior Court in her favor in an action by Respondents, Samantha Egelhoff and David Egelhoff (David A. Egelhoff, Jr.), children of decedent from a prior marriage.¹ The Court of Appeals reasoned the children of decedent were entitled to the benefits of decedent's pension plan and employment-based life insurance policy under RCW 11.07.010, and that the federal Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001-1461, did not preempt a state statute which revoked entitlement of a former spouse to life insurance proceeds and pension plan benefits upon dissolution of a marriage. We affirm.

QUESTION PRESENTED

The question presented in this case is whether under RCW 11.07.010 Decedent David A. Egelhoff's designation during their marriage of his then-spouse, Donna Rae Egelhoff, as beneficiary of his pension plan and employment-based life insurance policy was revoked upon dissolution of their marriage and whether any disposition under the insurance policy and pension plan is preempted by ERISA.

STATEMENT OF FACTS

The facts in this case are stipulated.² Decedent David A. Egelhoff and Donna Rae Egelhoff were married on November 4, 1988 in Tacoma, Washington.³ They separated on October 1, 1993.⁴

During their four and one-half year marriage, Decedent David A. Egelhoff designated Donna Rae Egelhoff as beneficiary under his Disability and Life Insurance Plan⁵ and his Defined Contribution Profit Sharing Plan,⁶ jointly provided by him and his employer, the Boeing Company.⁷

The parties stipulated that ERISA governs administration of David A. Egelhoff's Boeing life insurance policy and pension plan. Petitioner Donna Rae Egelhoff filed a pro se petition for dissolution of marriage in the Pierce County Superior Court on December 30, 1993.⁸ A decree of dissolution was entered on April 22, 1994.⁹ In a document incorporated in the decree,¹⁰ David A. Egelhoff was awarded "100% of his Boeing retirement 401K and IRA."¹¹

On June 23, 1994, two months after the dissolution, Decedent David A. Egelhoff was injured in an automobile accident.¹² He died from his injuries on July 8, 1994.¹³ He died intestate.¹⁴ At the time of his death, Donna Rae Egelhoff remained beneficiary of record under both his life insurance policy and his pension plan.¹⁵ Decedent was paying court ordered child support at the time of his death.¹⁶

The proceeds of Decedent David A. Egelhoff's life insurance plan, totaling $46,000.00, were paid to his former spouse, Petitioner Donna Rae Egelhoff, on August 3, 1994.¹⁷ On November 15, 1996, decedent's statutory heirs,¹⁸ Samantha Egelhoff, a minor, and David Egelhoff, children from his first marriage to Kate Breiner,¹⁹ filed a complaint against Donna Rae Egelhoff in the Pierce County Superior Court to recover the proceeds of their father's life insurance which had been paid to her.²⁰ She filed her answer on August 6, 1997, asserting the heirs' claims are preempted by ERISA, 29 U.S.C. § 1144(a).²¹ She then filed a motion for summary judgment on August 27, 1997.²² The heirs, relying upon RCW 11.07.010, opposed the motion, arguing that Washington law revoked Petitioner's designation as beneficiary under the life insurance plan.²³

On October 10, 1997, the Pierce County Superior Court, the Honorable Frederick B. Hayes, granted summary judgment in favor of Petitioner Donna Rae Egelhoff.²⁴ The Court concluded that David A. Egelhoff's life insurance plan "should be administered in accordance with the Employment Retirement Income Security Act and the designated beneficiary, Donna Rae Egelhoff shall have all legal rights to the proceeds which have been paid thereto."²⁵

On May 30, 1997, while asserting a claim to their father's life insurance proceeds, the heirs also moved for summary judgment to recover his pension plan benefits then held by Boeing.²⁶ The Boeing Company's employee pension plan provided that the children of the deceased become beneficiaries if the proceeds do not pass to the named beneficiary and there is no surviving spouse.²⁷ Respondents claimed that under the property distribution incorporated in the dissolution decree Petitioner Donna Rae Egelhoff waived her right to benefits under their father's pension plan.²⁸

On August 8, 1997, the Pierce County Superior Court, the Honorable Karen L. Strombom, ordered that the pension plan benefits "should be administered in accordance with the Employment Retirement Income Security Act of 1974 (`ERISA') and that the designated beneficiary, Donna Rae Egelhoff shall have all legal rights thereto[.]"²⁹ In addition, the Court stayed the order for summary judgment on August 15, 1997 and directed that pension plan benefits not be distributed to any party pending outcome of the case on appeal.³⁰

Respondents, the statutory heirs, on August 15, 1997 filed in the Court of Appeals, Division II, an appeal of the order disposing of their father's pension plan benefits.³¹ On October 22, 1997, they filed an appeal of the order disposing of their father's life insurance benefits.³² The Court of Appeals on November 13, 1997 granted their motion for consolidation of both cases.³³ On December 23, 1998, the Court of Appeals, Division II, the Honorable J. Robin Hunt writing, reversed the summary judgments of the Pierce County Superior Court, concluding that RCW 11.07.010 was not preempted by ERISA.³⁴ The Court determined the children of Decedent David A. Egelhoff were entitled to the benefits of his pension plan and employment-based life insurance under that statute.³⁵ The Court reasoned the Washington statute did not have a "reference to" nor a "connection with" the ERISA plan, and did not significantly affect administration of the plan,³⁶ thus lawfully invalidating designation of the former spouse, Donna Rae Egelhoff, as beneficiary on any nonprobate asset held by ERISA plan participant Decedent David A. Egelhoff at the time of dissolution of their marriage.

Petitioner Donna Rae Egelhoff petitioned this Court for review which was granted on June 1, 1999.³⁷

DISCUSSION

Prior RCW 11.07.010 provided:³⁸

(1) This section 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.

(2) (a) 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.

....

(5) As used in this section, "nonprobate asset" means those rights and interests of a person having beneficial ownership of an asset that pass on the person's death under only the following written instruments or arrangements other than the decedent's will:

(a) A payable-on-death provision of a life insurance policy, employee benefit plan, annuity or similar contract, or individual retirement account[.]

....

(Emphasis added.)

Petitioner claims RCW 11.07.010 is preempted by ERISA. She contends the broad preemption provision under 29 U.S.C. § 1144(a) precludes application of the state statute, RCW 11.07.010, to this case. Respondents argue, to the contrary, that RCW 11.07.010 is not preempted by ERISA. They assert that the statute lawfully invalidated Petitioner's status as an ERISA plan beneficiary of their father's nonprobate assets upon dissolution of her marriage to their father. They argue that there is consequently no named beneficiary under their father's pension plan and life insurance policy; and that his children should receive the benefits under his pension plan.³⁹ The Court of Appeals agreed with Respondents and awarded to them their father's pension plan benefits and life insurance proceeds.

PREEMPTION

ERISA is a comprehensive federal statute which regulates employee pension and welfare plans.⁴⁰ It is designed to promote the interests of employees and their beneficiaries in employee benefit plans.⁴¹ ERISA contains a broad preemption provision that supersedes state laws that "relate to" employee benefit plans. 29 U.S.C. § 1144(a) states "[ERISA] shall supersede any and all State laws insofar as they ... relate to any employee benefit plan [covered by the statute]."⁴²

29 U.S.C. § 1144(a) reads:

(a) Supersedure; effective date

Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of

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