Statements of Introduced Bills and Joint Resolutions - S. 1616
STATEMENTS OF INTRODUCED BILLS AND JOINT RESOLUTIONS
By Ms. LANDRIEU:
S. 1616. A bill to amend the Employee Retirement Income Security Act of 1974 to prevent the preemption of State community property law as it relates to nonforfeitable accrued retirement benefits; to the Committee on Health, Education, Labor, and Pensions.
Ms. LANDRIEU. Mr. President, the Senate is expected to consider important legislation that will affect the pensions of millions of Americans and their families during the 108th Congress. In the last Congress we provided greater security to pensions by correcting the accounting abuses that lay at the heart of the Enron and WorldCom bankruptciesbankruptcies that caused the employees of these companies to lose their life savings and hurt the investment portfolios of thousands of individual investors.
Today, I am introducing legislation to correct a unique problem under ERISA for States with community property laws.
The issue came to light in the 1997 Supreme Court decision in the case of Boggs v. Boggs. The Court held that ERISA preempted the application of Louisiana's community property law in the disposition of pension benefits. While the case originated in Louisiana, the holding tears a hole in the fabric of community property laws of seven other States, Texas, New Mexico, California, Arizona, Nevada, Washington, and Idaho.
Long before the women's movement, community property laws stood for the basic premise that a marriage is an economic, as well as social, child rearing partnership in which the ownership of property acquired during the marriage is shared equally. The Boggs case involved a husband and wife. The husband began accumulating benefits in a pension plan after they got married. The wife did not have a pension plan, but under the community property law of Louisiana, half of her husband's benefits were hers. The wife died before her husband retired, and before the plan's benefits were subject to distribution. In her will she left her interest in the pension benefits to her husband for the rest of his life, with the remaining interest to her sons for after her husband died. The husband subsequently remarried, retired, and ultimately died, leaving property to his second wife and an interest in his remaining assets to his sons. The sons attempted to enforce their State-law interest in the pension benefits bequeathed to them by their mother against the second wife. The Supreme Court held against the sons, saying that they were not beneficiaries of, nor participants in, the pension plan under ERISA.
This holding goes against the fundamental principles of community property. What the Court is saying is that although a husband's 401K plan may contain a million dollars of deferred earnings accumulated during the course of his marriage, if his wife dies before he retires, her interest terminates; she co-owned none of it. The fundamental principle of marriage as an equal partnership under community property is rendered meaningless by this decision.
The Boggs ruling will also lead to conflicting results in the disposition of assets at death in community property States. If, instead, the money had been put in an ordinary savings account that is not covered by ERISA, half of it would have been owned by the wife as community property in recognition of her contribution to the marriage. At her death, she would have been free to dispose of the assets as she saw fit. Furthermore, after Boggs, if a couple has both a 401K plan and a savings account, upon the death of the wife the husband gets all of the 401K plan plus half of the savings account; the wife's estate gets only half of the savings account. That is not the equal outcome community property laws seek.
The legislation that I am proposing will create a narrow exception within the ERISA preemption provisions to address the circumstances under Boggs. Instead of losing the community property interest in any non-forfeitable accrued pension benefits at death, a spouse will retain that interest and will be able to pass that interest on to his or her heirs. This is not an exceptional change to ERISA. What I am proposing does not affect the joint and survivor annuity required by ERISA nor does it prevent the participant from having the use and enjoyment of the entire retirement asset until his death. It does not place any new burden on the retirement plan administrators. It envisions that upon the death of the participant, the State probate court will apply normal community property principles, taking into account the value of the retirement assets at the time of the participant's death, in distributing the participant's property between the heirs of the participant and the heirs of the predeceased spouse. Furthermore, each community property State will have the freedom to implement the amendment by whatever means the State deems best, including the option not to implement the amendment at all.
ERISA already contains exceptions to its preemption provisions. One applies to divorce or other Qualified Domestic Relations Orders. This exception, added to ERISA by the Retirement Equity Act of 1984, allows States to apply their community property laws or equitable division laws to retirement assets when a couple gets divorced. A divorced spouse can retain an interest in the undistributed pension assets of their ex-husband or wife. As it now stands, therefore, ERISA is more favorable to a spouse who divorced the participant before dying, than a spouse who remained married to the participant until death.
The Senate should act to reaffirm the principles of community property. My legislation upholds the basic ideal of community property law: that marriage is a partnership that values as equal the contributions of both the husband and the wife. This notion of equality holds true whether one spouse worked and the other stayed at home. I urge my colleagues to pass this legislation.
I ask unanimous consent that the text of this bill be printed in the Record.