Property Settlement Agreement; Assignment of Pension Benefits to a Third Party for Survival Annuity.
Estate of Benyo v. Breidenbach, 2009 WL 2094264 (Pa. Super. 2019)(unreported), allocatur granted Nov. 20, 2019, appeal docket 90 MAP 2019
The Supreme Court granted allocatur in this case to consider whether a court order requiring a beneficiary to “transfer” ERISA-exempt pension payments received from the plan administrator of the Pa. Municipal Police Pension Law (MPPL) violates the MPPL, which specifically prohibits “transfer” of its payments and further prohibits the payments from being subject to “legal process.”
Michael Benyo (Husband), a police officer with a defined benefit pension to which he made no personal contributions, and Marsha Benyo (Wife), an account manager with a 401(k) retirement plan that she participated in as a profit sharing plan with employer, married in 1989. After Husband retired, he chose to receive his pension through the Pennsylvania Municipal Retirement System (PMRS) as a joint annuity benefits option. Under this plan, Husband received lesser monthly payments than he would have received if he filed single and Wife would continue to receive payments for remainder of her life.
Husband and wife sought divorce in 2012, which included a property settlement agreement (PSA) that was incorporated in final divorce decree. Pursuant to the PSA, Wife was to obtain Husband’s share of the marital residence and pay Husband for half of the property’s value within thirty days of the agreement. As to the parties’ retirement benefits, the PSA provided:
Husband agrees to waive all right, title and interest in Wife’s Brown Printing Profit Sharing Plan. Husband will sign any necessary paperwork to facilitate said waiver. Wife will agree to waive all right, title and interest in Husband’s Police Pension. Wife will sign any necessary paperwork upon demand to facilitate said waiver. In addition, Wife agrees to waive any death benefit from Husband’s Pension. She will sign any necessary paperwork to facilitate said waiver. At the time of the signing of this Agreement, Wife is to receive a one hundred percent (100%) death benefit.
If the Plan Administrator of said Pension will not permit a waiver of said death benefit to Wife or a change of beneficiary based on Wife’s life expectancy, Wife will agree to sign any necessary paperwork, including a statement in writing that she waives the benefits and instructs her estate to make payment of any benefits it may receive to a beneficiary designated by Husband. As of the date of the signing of this Agreement, the designated beneficiary of the death benefit will be Jeffrey Benyo, who currently resides at 186 Upper Valley Road, Christiana, Pennsylvania. Unless Wife receives a written statement from Husband that the designated beneficiary has changed, any proceeds that she or her estate receives shall be paid to Jeffrey Benyo. It is understood that, if Wife fails to fulfill the obligation set forth in the Agreement, Jeffrey Benyo and/or the estate of Michael Benyo may pursue all claims he or the estate may have against Wife and may seek appropriate sanctions including but not limited to counsel fees.
Currently Husband is receiving monthly payments from his Police Pension. The aforesaid benefits were used for the benefit of both parties. As a result, Wife agrees to reimburse Husband for fifty percent (50%) of the net proceeds he received since October 2010. Said reimbursement shall be performed on or before June 30, 2012. As of June 30, 2012, said reimbursement will be Seventeen Thousand Eight Hundred Twenty Dollars ($17,820).
Wife currently has a 401(K) with Brown Printing. Wife agrees to transfer fifty percent (50%) of said 401(K) to Husband. Said 50% interest shall be calculated as of June 30, 2012. Husband shall also be entitled to any market increases of said interest as of June 30, 2012 and his interest shall be reduced by any market decreases that arise thereafter, as well. Husband, through his counsel, shall be responsible for drafting any Qualified Domestic Relations Order that is necessary to facilitate said transfer. Wife shall cooperate in signing said Qualified Domestic Relations Order [(“QDRO”)] within ten (10) days of demand.
Slip op. at 3-4. After execution of the PSA, the parties performed their individual obligations under the PSA except for Wife’s waiver of Husband’s pension benefits because PMRS advised Husband he could not change the benefit option nor select a different person as joint annuitant. In accordance with the terms of the PSA, the parties executed a proposed QDRO (“a domestic relations order that creates, recognizes, or assigns to an alternate payee the right to receive all or a portion of the benefits payable to a participant under a pension plan subject to the Employee Retirement Income Security Act (ERISA),” Slip op. at 17) which was entered by the trial court. A praecipe to transmit the record to the court for entry of the decree was filed, however the trial court denied the request based on Husband’s improper service and instructed the parties to file a new praecipe. The day after the trial court’s order, the Husband committed suicide.
The Wife’s 401(k) share was transferred to Husband but PMRS ruled that the PSA did not affect its obligations to pay the Husband’s pension benefits to Wife. Husband’s estate and Jeffrey Benyo (Husband’s brother who represented the estate) filed a complaint against Wife requesting the court order Wife to place all PMRS funds into escrow pending resolution of the case, declare the PSA enforceable, find that Wife breached the PSA in failing to transfer PMRS payments to Jeffrey, and order Wife to transfer future payments to Jeffrey. Wife alleged the PSA was unenforceable and the QDRO was invalid because the transfer of ERISA-exempt pension payments received from the plan administrator of the MPPL to the estate of the late spouse violates the MPPL’s anti-alienation provisions, when the MPPL specifically prohibits “transfer” of its payments and further prohibits the payments from being subject to “legal process” The trial court ruled in favor of Husband’s Estate and Jeffrey but provided that as long as Wife paid PMRS funds she received and complied with forwarding future payments, Husband’s estate was prohibited from registering judgment on the verdict.
Before conclusion of Wife’s appeal, Wife died and Wife’s estate failed to follow orders of the court. Husband’s estate requested that the Superior Court adopt the findings and conclusions of the trial court. Superior Court affirmed the trial court’s order, holding that Pennsylvania law allows the assignment of Wife’s interest to a third party for the survivor annuity, in accordance with Superior Court’s recent and comparable decision in In re Estate of Easterday, 171 A.3d 911 (Pa. Super. 2017), explaining:
In that case, the spouses also entered into an agreement to waive their rights to each other’s pensions, but the husband died before his beneficiary was changed and before grounds for divorce were established and a decree entered. Under ERISA, the payments could not be made to anyone other than the beneficiary designated in the retirement plan documents. To enforce the parties’ agreement, therefore, the trial court ordered the wife to pay to decedent’s estate all of the pension benefits she received from the plan. This Court affirmed, holding that, while ERISA removed the court’s ability to require the retirement plan administrators to directly pay funds to a third party, it could enforce the parties’ property settlement agreement by ordering the wife to turn over to the husband’s estate all proceeds she had received, as well as any future proceeds she was entitled to receive. Id. at 920.
Thus, pursuant to the law cited above, the trial court in the case sub judice did not circumvent any illegality by ordering Wife to comply with the PSA by remitting payments she received from PMRS to Jeffrey Benyo after she received them.
Slip op. at 24-25.
The Supreme Court granted allocatur to consider:
Whether, similar to In re: Estate of Easterday, 171 A.3d 91 (Pa. Super. 2017), affirmed 209 A.3d 331 (Pa. 2019), a Superior Court affirmed order requiring a beneficiary to “transfer” ERISA-exempt pension payments received from the plan administrator of the Pa. Municipal Police Pension Law (hereafter MPPL) to the estate of the late spouse violates the MPPL’s anti-alienation provisions, when the MPPL specifically prohibits “transfer” of its payments and further prohibits the payments from being subject to “legal process” thereby being a case of first impression and of such public (and governmental) importance as to require Supreme Court action?
As part of the courts’ ongoing Covid 19 response, the Supreme Court will hear oral argument in this case via video conference: www.pacourts.us/courts/supreme-court/may-2020-supreme-court-session.