ERISA-District Court Rules That A Waiver Of A Qualified Joint and Survivor Annuity Can Be Challenged Based On The Fiduciary’s Breach of Duty To Disclose Material Information

In Canestri v. NYSA-ILA Pension Trust Fund And Plan, No. 07-1603 (D.C.N.J. 2009), the Court denied a pension plan’s motion for summary judgment that a waiver of a qualified joint and survivor annuity-which meets all requirements of the Internal Revenue Code and ERISA- is valid even if the plan fiduciary’s failed to disclose important information.

In Canestri, the plaintiff is the surviving spouse of a participant in the NYSA-ILA Pension Trust Fund (the “Trust Fund”). When applying for benefits under the Trust Fund, the plaintiff and her spouse signed, among other things, a waiver of the Trust Fund’s qualified joint and survivor annuity (the “QJSA”). By waiving the QJSA, the plaintiff and spouse gave up the plaintiff’s right to receive a survivor annuity (or other death benefit) from the Trust Fund if the spouse should die first, in exchange for the spouse receiving a single life annuity, under which the payments are higher than under the QJSA because all payments stop upon the spouse’s death. The Trust Fund made pension payments to the plaintiff’s spouse until his death, approximately sixteen months after the benefits were applied for. No payments were made after the spouse’s death.

Despite having signed the waiver, the plaintiff sued the Trust Fund for a survivor benefit, claiming that the waiver of the QJSA was not made knowingly and voluntarily. The Trust Fund asked the Court for a summary judgment in its favor, on the grounds that the waiver complied with all requirements of the Internal Revenue Code and ERISA. For purposes of ruling on the motion for summary judgment, the Court accepted as fact that (1) neither the plaintiff nor her spouse had read the QJSA waiver or any other papers included in the application for benefits before signing them, (2) the documents were not adequately explained to them, and that (3) the plaintiff’s spouse was not feeling well on the day that the plaintiff and her spouse completed the waiver and the rest of the application for benefits.

The Court stated that, generally, a QJSA waiver-at least one which facially complies with all Code and ERISA requirements- speaks for itself and may not be challenged by assertions that it was not what a party intended or understood. However, under ERISA, the waiver is valid only so long as the plan fiduciary who procured the waiver acts in accordance with his fiduciary duties. The plan fiduciary has the legal duty to disclose to a plan beneficiary, such as the plaintiff, those material facts which are known to the fiduciary but not to the beneficiary and which the beneficiary must know for her own protection. Thus, the fiduciary has an affirmative duty under ERISA to inform the beneficiary of material facts when the fiduciary knows that silence might be harmful. Here, the alleged facts indicate that the plan fiduciary breached its fiduciary duty by knowing that a waiver of the QJSA would only be beneficial if the plaintiff’s spouse was expected to live many more years, which he was not, but failing to disclose this information despite evidence that the plaintiff did not understand the forms she was signing. As such, the Court denied the Trust Fund’s motion for summary judgment.

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