Lawsuit by Surviving Same-Sex Spouse Raises Windsor Retroactivity Question
A complaint filed this month against FedEx Corporation and its pension plan asks a court to apply the Supreme Court’s decision in Windsor v. United States retroactively. The case is Schuett v. FedEx Corporation. The plaintiff is the surviving same-sex spouse of a FedEx pension plan participant who died six days before the Court issued its opinion in Windsor.
Case background. The participant and the plaintiff began living as a couple in 1983. The participant worked as a FedEx delivery driver for 26 years while the plaintiff stayed home to care for the couple’s two children. The participant was diagnosed with cancer and learned on June 3, 2013, that her condition was terminal. Already registered as domestic partners in California, the couple held a bedside wedding ceremony June 19, 2013, and the participant died the following day.
Six days later, the Supreme Court held in Windsor that the U.S. Constitution requires federal law to recognize state-sanctioned same-sex marriages. The Court overturned section 3 of the Defense of Marriage Act (“DOMA”), which defined marriage under federal law to exclude same-sex couples. The same day, the Court decided Hollingsworth v. Perry, a procedural ruling that effectively reinstated same-sex marriage in California. The plaintiff obtained a marriage certificate and a judicial order declaring the couple’s marriage legally valid as of June 19, 2013.
The benefit claim and subsequent lawsuit. The plaintiff sought a qualified preretirement survivor annuity, or QPSA, from FedEx’s pension plan as the participant’s surviving spouse. The plan refused to pay any benefit. According to the complaint, the plan defined “spouse” and “marriage” to apply only to opposite-sex couples, as provided in section 3 of DOMA. The claims administrator and appeals committee concluded that the plan’s terms required it to consider the participant to be unmarried when she died. This position impliedly presumes that section 3 of DOMA remained in force on June 20, 2013 (the participant’s date of death).
The plaintiff sued in the Northern District of California on January 14, 2015. The plaintiff is represented by the National Center for Lesbian Rights (NCLR), a national advocacy organization that promotes LGBT issues through strategic litigation. The complaint and the organization’s press release frame the lawsuit as an LGBT civil rights case.
The complaint raises three claims: (1) a claim for benefits; (2) breach of fiduciary duty for failure to administer the plan in accordance with the law; and (3) breach of fiduciary duty for failure to inform/misleading communications.
The first two claims turn on the same question: When the Supreme Court overturned section 3 of DOMA in the Windsor decision, did federal law granting spousal rights cease to exclude same-sex couples only prospectively, or did the change also apply retroactively? The Supreme Court’s opinion in Windsor did not address this issue. IRS guidance, in particular IRS Notice 2014-19, requires plans to comply with Windsor as of June 26, 2013, though plans may choose to apply Windsor before this date, for limited purposes or all purposes. Notice 2014-19 notes, however, that retroactive application for all purposes could be difficult to implement.
Courts have yet to weigh in on this question. A lawsuit that included a similar claim for benefits was filed in the District of Connecticut on May 12, 2014, but the parties subsequently settled the case.
The third claim takes issue with the plan’s communications to the participant before her death. According to the complaint, the participant repeatedly asked whether her spouse would receive a QPSA but did not receive a clear answer until the days before her death. The complaint further alleges that a plan representative gave her misleading advice, urging her to opt for disability leave instead of early retirement without telling her that, under the plan’s terms, this meant forgoing an Optional Joint and Survivor Annuity benefit that would have allowed her to name her surviving same-sex spouse as beneficiary.
Lessons for plan administrators. Plans that amended their terms to recognize same-sex marriage prospectively from June 26, 2013, in accordance with Notice 2014-19, might still encounter questions and claims that raise the issue of pre-Windsor recognition. Generally, plan administrators are required to apply the existing terms of the plan when they decide benefit claims: they lack the authority unilaterally to grant benefits not provided under the plan terms, unless the plan terms conflict with Title I of ERISA. A plan administrator faced with a pre-Windsor claim might have to determine what rights a same-sex spouse had under Title I of ERISA before the Supreme Court issued its decision in Windsor to ensure that plan terms do not conflict. Plan sponsors have the authority to amend the plan to provide benefits that are not provided by the plan’s existing terms.
If plan administrators anticipate that the plan might receive these types of claims, they should consider addressing these questions in advance, to ensure the plan is prepared to timely resolve the claims once they are received.