Pensions and Retirement--determining beneficiary--non-ERISA plan-
-equivalent Internal Revenue Code section
The trial court did not err by granting summary judgment for
plaintiff in an action to determine the recipient of a local
government employee's retirement benefit after his death where he
had designated plaintiff, his sister, as the beneficiary when the
plan was established; he subsequently married defendant; and he
did not change the earlier beneficiary designation. This is a
“government plan” exempt from ERISA and the section of the
Internal Revenue Code concerning the payment of benefits to
surviving spouses to which it referred does not create
substantive rights that an individual can enforce as the
potential beneficiary of a retirement plan.
William F. Burns, Jr. for plaintiff-appellee.
Plumides Law Office, by Daniel J. Clifton, for defendant-
appellant.
CAMPBELL, Judge.
Donna Meeks Wood (“defendant”) appeals from the trial court's
entry of summary judgment in favor of Debora W. Moore
(“plaintiff”). We affirm.
Defendant is the surviving spouse of Walter J. Wood(“decedent”), as well as the administrator of decedent
's estate.
Plaintiff is the surviving sister of decedent. Prior to his death
on 6 April 1999, decedent was an employee of the Housing Authority
of the City of Charlotte (“CHA”) and a participant in the CHA's
Housing-Renewal and Local Agency Retirement Plan (“the Plan”),
which was administered by William M. Mercer, Inc. (“Mercer”). At
the time of his death, decedent had built up a retirement account
under the Plan.
In 1993, when the original contract was signed by decedent
establishing his retirement account under the Plan, decedent named
plaintiff, his sister, the primary beneficiary of the retirement
account. At that time, decedent was not married to defendant.
Decedent subsequently married defendant, but the record does not
show that decedent ever executed any change to his earlier
beneficiary designation under the Plan.
On 21 January 2000, plaintiff filed a complaint in 00 CVS 1045
against defendant and Mercer, as administrator of the Plan, seeking
a declaratory judgment that as the designated beneficiary she was
entitled to all of the benefits due and payable under the Plan. In
addition to the aforementioned background facts, plaintiff alleged
that decedent's designation of her as beneficiary was done while
decedent was fully competent, and that at no time thereafter had
decedent intended to change his beneficiary designation. Plaintiff
further alleged that the Plan was a “government plan” within the
meaning of 29 U.S.C. § 1002(32), and therefore exempt from
compliance with the Employment Retirement Income Security Act
(“ERISA”). 29 U.S.C. § 1003(b)(1)(1999). That same day, defendant filed a complaint in 00 CVS 1053
against CHA and Mercer seeking recovery of all the benefits due and
payable under the Plan. Defendant alleged that the Plan was
covered by ERISA, and as the surviving spouse she was entitled to
the benefits of decedent's retirement account pursuant to 29 U.S.C.
§ 1055. That section requires that all retirement plans covered by
ERISA must provide benefits to the surviving spouses of employees
who die before retirement. 29 U.S.C. § 1055(a)(2)(1999). These
survivorship benefits are payable unless they are expressly waived
by the employee with the consent of the spouse. 29 U.S.C. §§
1055(c)(1)(A), (2)(A). Defendant alleged that she had never
consented to any such waiver.
On 23 February 2000, CHA filed a motion to dismiss defendant's
claim against it in 00 CVS 1053 pursuant to N.C. R. Civ. P.
12(b)(6). On 8 March 2000, plaintiff filed a motion to consolidate
the two actions pursuant to N.C. R. Civ. P. 42(a). On 17 April
2000, the trial court entered an order consolidating the two
actions and an order dismissing defendant's complaint against CHA.
On 9 May 2000, plaintiff moved for summary judgment as to all
issues in the consolidated actions. The trial court granted
summary judgment in favor of plaintiff in an order signed 27 July
2000 and filed 31 July 2000. In its order the trial court ruled
that plaintiff was “entitled to receive all vested retirement
benefits and supplemental death benefits afforded by the plan to
the decedent's designated beneficiary.” Defendant filed notice of
appeal on 27 July 2000.
By her sole assignment of error, defendant argues that thetrial court erred in granting summary judgment in favor of
plaintiff. We disagree. Summary judgment is proper “if the
pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show that there is
no genuine issue as to any material fact and that any party is
entitled to a judgment as a matter of law.” N.C. R. Civ. P. 56(c).
Having reviewed the record and found no genuine issue of material
fact, we must determine whether the trial court erred in holding
that plaintiff was entitled to judgment as a matter of law.
Defendant concedes in her brief that the Plan is a “government
plan” and therefore exempt from the requirements of ERISA
concerning the payment of benefits to surviving spouses. 29 U.S.C.
§ 1003(b)(1). Nonetheless, defendant argues that since the Plan
was drafted “with Section 401 of the Internal Revenue Code as the
reference point,”
(See footnote 2)
that sections 401 and 417 of the Internal
Revenue Code (“IRC”), which are identical to ERISA provisions
concerning the payment of benefits to surviving spouses, apply and
entitle defendant to decedent's retirement benefits. Defendant's
argument assumes that section 401 of the IRC creates substantive
rights that an individual can enforce as the potential beneficiary
under a retirement plan. We disagree. Title II of ERISA sets out requirements pertaining to the
qualification of pension plans for favorable tax treatment. See 26
U.S.C. §§ 401-419A (1999). Defendant attempts to use these
provisions to assert that the Plan is required to pay her
decedent's retirement benefits. However, defendant fails to cite
any case law to support her position that section 401 of the IRC
creates substantive rights that can be enforced by an individual in
a private cause of action. Defendant's failure to cite such case
law is very likely for the same reason that our research did not
uncover such case law -- it simply does not exist.
Federal courts have consistently held that there is no basis
to find that the provisions of section 401 of the IRC -- which
relate solely to the criteria for tax qualification under the
Internal Revenue Code -- are imposed on pension plans by the
substantive terms of ERISA. See Reklau v. Merchants Nat. Corp.,
808 F.2d 628, 631 (7th Cir. 1986), cert. denied, 481 U.S. 1049, 95
L. Ed. 2d 836 (1987); Cowan v. Keystone Emp. Profit Sharing Fund,
586 F.2d 888, 890 n.3 (1st Cir. 1978) (“This section [§ 401 of the
I.R.C.] does not appear to create any substantive rights that a
beneficiary of a qualified retirement trust can enforce.”); Wiesner
v. Romo Paper Products Corp., Etc., 514 F. Supp. 289, 291 n.2
(E.D.N.Y. 1981) (“The sections relied on, 26 U.S.C. §§ 401, 404 and
503, do not create a substantive right that a beneficiary,
participant, or fiduciary could enforce.”); Vermeulen v. Cent.
States, Southeast and Southwest, 490 F. Supp. 234, 237 n.6
(M.D.N.C. 1980) (“This court agrees with the First Circuit'sholding in Cowan v. Keystone Employees Profit Sharing Fund, 586
F.2d 888, 890 n.3 (1st Cir. 1978).”). While all of these federal
cases deal with attempts to use provisions of the Internal Revenue
Code as the basis for actions against retirement plans which are
covered by ERISA, we find no reason why a different rule should
apply in the context of an attempt to use section 401 of the IRC as
the basis of an implied private cause of action against a
government retirement plan that is exempt from ERISA. Therefore,
we hold that the trial court did not err in finding that there was
no genuine issue of material fact and plaintiff was entitled to
judgment as a matter of law.
Affirmed.
Judges GREENE and BRYANT concur.
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