Following the Supreme Court’s 2013 decision in U.S. v. Windsor (in which the Court held that Section 3 of the federal Defense of Marriage Act (“DOMA”) was unconstitutional), one of the questions facing sponsors of tax-qualified retirement plans was whether the plans were required to recognize same-sex spouses on a retroactive basis for purposes of entitlement to spousal benefits.  The IRS answered that question in Notice 2014-19, in which it stated that, for tax-qualification purposes, such plans are required to treat same-sex marriages in the same manner as opposite-sex marriages effective as of June 26, 2013 (the date of the Windsor decision). The IRS also clarified that plans could be amended to recognize same-sex marriages prior to that date, but such earlier recognition was not required for qualification purposes.

A recent federal district court decision in the Northern District of California suggests that some courts might have a different view. In Schuett v. FedEx Corporation, the court denied FedEx’s motion for judgment on the pleadings on a breach of fiduciary duty claim brought by a deceased employee’s same-sex spouse, whose claim for a qualified preretirement survivor annuity (“QPSA”) under FedEx’s retirement plan was denied.  The employee passed away one week before Windsor was decided, and FedEx denied the claim based on the plan’s pre-Windsor definition of “spouse,” which incorporated the DOMA definition of marriage (i.e., a union between a man and a woman).  The spouse’s administrative appeal also was denied by FedEx’s Appeals Committee, which found that, under the terms of FedEx’s plan, the employee was not “married” under the plan definition of “spouse” at the time of her death (before Section 3 of DOMA was held to be unconstitutional) and did not have a surviving spouse at that time.

In the spouse’s lawsuit against FedEx, she asserted three causes of action in the alternative under ERISA: (i) a claim for benefits, (ii) a claim for breach of fiduciary duty for failure to administer the Plan in accordance with applicable law, and (iii) a claim for breach of fiduciary duty for failure to inform and/or for providing misleading communications. The court denied in part the defendants’ motion for judgment on the pleadings, allowing the plaintiff to proceed on the claim for breach of fiduciary duty under section 502(a)(3) of ERISA due to a failure to administer the plan in accordance with applicable law.  The court found that the plaintiff adequately alleged that FedEx violated ERISA by acting contrary to applicable federal law and failing to provide a benefit mandated by ERISA (the QPSA), and that she is entitled to pursue equitable relief to remedy that violation.

In reaching this conclusion, the court noted that ERISA requires a fiduciary to follow plan documents only to the extent that they are consistent with ERISA and pointed to a plan provision stating that federal law would govern in the event that a plan term was inconsistent with federal law. The court also reasoned that the Windsor case appeared to invalidate DOMA retroactive to its 1996 enactment, and noted that the Windsor decision itself applied retroactively.  In addition, the court relied to some extent on an earlier post-Windsor case, Cozen O’Connor P.C. v. Tobits, in which a federal district court concluded that Windsor applied retroactively in the context of a surviving spouse benefit where the plan document did not explicitly define the term “spouse” to exclude same-sex spouses.

It is important to note that the court’s decision in Schuett merely allows the surviving spouse to proceed with her breach of fiduciary claim against FedEx (in which she seeks declaratory and injunctive relief amounting to payment of the QPSA); it does not require FedEx to apply Windsor retroactively or pay a benefit to the spouse.  Also notable is the fact that the court granted FedEx’s motion to dismiss the spouse’s other two claims.  With regard to the claim for wrongful denial of benefits under section 502(a)(1)(B) of ERISA, the court concluded that the spouse had not alleged facts demonstrating that FedEx had abused its discretion in interpreting the plan’s definition of spouse, because the definition was unambiguous and nondiscretionary.  On the claim for breach of fiduciary duty under section 502(a)(3) of ERISA alleging that FedEx failed to provide complete and accurate information about survivor benefits that may have been available to the employee’s designated non-spouse beneficiary under the plan if the employee had retired prior to her death, the court found that the spouse lacked standing to pursue this claim because she was not designated as the employee’s beneficiary.