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Hell Hath No Fury Like a Woman Denied Her Husband’s Benefits.

Hoak v. Plan Adm’r of Plans of NCR Corp., 389 F. Supp. 3d 1234 (N.D. Ga. 2019)

(a) Facts: Two wives were divorced from their husbands. Both husbands were members of a senior executive retirement plan. The plan provided that survivor benefits would be paid to the “eligible spouse” of each plan participant. “Eligible spouse” was defined as “the spouse to whom the Participant is married on the date the Participant’s benefit payments under the Plan commence.” 389 F. Supp. 2d at 1278.

Each wife was married to the husband when their respective husbands’ benefits commenced. Both wives were then divorced from their husbands. At some point after the two divorces, the employer terminated the plan and paid the benefits to the participating employees in a lump sum, thereby depriving the wives of their survivor benefits. It then formally reconstrued “eligible spouse” to mean a person married to a plan participant on the date when the plan was terminated, so that neither wife was entitled to survivor benefits. Both wives sued the plan, seeking a judgment that they were entitled to survivor benefits.

(b) Issue: Were the wives entitled to survivor benefits?

(c) Answer to Issue: Yes.

(d) Summary of Rationale: The courts defer to the plan administrator’s construction of its own plan if the construction is reasonable. But the plan’s construction of “eligible spouse” was not reasonable. “While the term ‘Eligible Spouse’ might be ambiguous standing alone, the definition of the term in the plan is not ambiguous: an Eligible Spouse is the spouse of the Participant on the day he begins to receive retirement benefits.” Id. at 1279. “The Plan Administrator has impermissibly and unilaterally appended an additional requirement beyond what the Plan provides that adversely impacts the Plan’s beneficiaries.” Id. “The Plan Administrator’s interpretation constitutes a material modification to the terms of the Plan that adversely impacts the expectations of beneficiaries who reasonably relied on the express language of the plans when they may have made decisions on their marital property division of at the end of their marriages.” Id.

Obvious Lesson: Do not make changes to your company’s pension plan for the purpose of taking rights away from former spouses of your employees. It seems quite possible that even if the employer had prevailed, its attorney’s fees alone would have approached or exceeded the cost of paying the benefits. Since the company did not prevail, it was left liable for both the benefits and its attorney’s fees –a very substantial sum. The actions of the company in Hoak were not wise business decisions.

Observation: Alternate payees under QDROs and spouses who are direct beneficiaries under the plan (as the wives were in Hoak) are members of the plan, and they have standing to sue the plan if deprived of plan benefits. A decision to sue the plan should not be made lightly, as such a suit is extremely expensive, and significant deference is given to the plan administrator’s decisions. But when the plan starts denying benefits arbitrarily, there may come a point at which suing the plan is the only option. Hoak shows that it is not impossible for a former spouse to prevail in such an action.