FedEx Corp. may have violated ERISA by not awarding pension death benefits to the same-sex spouse of an employee who died one week before the U.S. Supreme Court ended bans on gay marriage, although the company reasonably interpreted its plan’s limitation of benefits to opposite-sex spouses before the 2013 High Court ruling, a federal district judge ruled Jan. 4.
The case has significant implications for other employer-sponsored defined benefit retirement plans that have denied retroactive benefits to same-sex spouses when requested before and after the U.S. v. Windsor decision.
In Schuett v. FedEx Corp., No. 15-cv-189-PJH, (N.D. Cal., Jan. 4, 2016), District Judge Phyllis J. Hamilton found no “basis for denying” that Windsor, the landmark June 2013 case striking down federal gay marriage prohibitions, should be applied retroactively in the case by FedEx.
Two Claims Denied
The plaintiff had also claimed that FedEx committed fiduciary breaches by failing to administer the pension plan in accordance with ERISA and by providing misleading participant communications to plaintiff Stacey Schuett and her widow, former longtime FedEx employee Lesly Taboada-Hall, while she was still alive. Judge Hamilton, of the U.S. District Court for the Northern District of California, denied these claims against the plan sponsor.
In a key point, Hamilton declared that the couple’s California marriage license dated June 19, 2013 — retroactively issued by a state court with that date after Schuett’s death the next day — was valid. The Windsor decision followed on June 26, 2013. If the court had determined that the couple was not “legally married,” it could have dismissed the case without ruling on the retroactive application of Windsor.
But the district judge also found that Schuett could not claim spousal pension benefits from the company because at the time of Taboada-Hall’s death, FedEx did not offer such benefits to same-sex married couples. She ruled it was within FedEx’s discretion to interpret its plan as barring Schuett from receiving spousal benefits.
The FedEx pension plan, like all qualified defined benefit pension plans, is required to offer a qualified preretirement survivor annuity that pays a survivor benefit to the spouse of any participant who dies before receiving his or her pension. Taboada-Hall had not yet retired at the time of her death.
Schuett subsequently applied for this $400,000 preretirement survivor annuity benefit, but the plan denied the claim on the basis that Schuett was not a “spouse” as defined under the plan because, on the date of Taboada-Hall’s death, the plan defined spouse based on the federal Defense of Marriage Act then in place before being partially invalidated by the Windsor decision.
FedEx Benefits Decisions
Schuett appealed that decision, stating that FedEx is only permitted to follow the terms of the plan document to the extent they are consistent with the law, and the law protects all spouses, including same-sex spouses. She further contended that FedEx is required to apply the law as it existed on the date her claim was submitted, not the date of Taboada-Hall’s death. The plan denied the appeal on the basis that Taboada-Hall was unmarried at the time of her death and had no surviving spouse.
Despite defending FedEx’s reasonable interpretation of the plan when denying Schuett spousal benefits, Judge Hamilton said that denial may have been a violation of ERISA.
To read the complete story on Thompson’s HR Compliance Expert, click here.