March 20, 2012

A series of agreements providing for the distribution of a Retirement System member’s death benefit considered in determining the lawful beneficiaries

A series of agreements providing for the distribution of a Retirement System member’s death benefit considered in determining the lawful beneficiaries
Johnson v New York State & Local Retirement Sys. et al, 2012 NY Slip Op 01881, Appellate Division, Fourth Department

In this decision the Appellate Division sustained the Retirement System’s administrative ruling that Dane V. Johnson and Danika V. Johnson were to be paid Dan Johnson's New York State Employees' Retirement System's [NYSERS] death benefit.

Wendy Johnson and Dan Johnson had executed a matrimonial settlement agreement in the course of their divorce that required them to name their children, Dane V. Johnson and Danika V. Johnson as "joint irrevocable designated beneficiaries" of the death benefits provided by their retirement plans.

However, Dan, shortly before executing the matrimonial settlement agreement, had named his then girlfriend, Kimberly Leone-Johnson (Leone), as a one-third beneficiary of his NYSERS death benefit and each of his children as a one-third beneficiary. Leone was not removed as a beneficiary after the judgment of divorce was entered in May 1998 and, moreover, in June 1998 Dan designated Leone as the sole beneficiary of his NYSERS death benefit.

Subsequently Dan and Leone executed a prenuptial agreement and were married. This prenuptial agreement stated that Dan and Leone “expressly waived all rights and claims to each other's pensions and retirement plans” and later, still, they executed a separation agreement, which contained clauses that “reaffirmed the pension and retirement plan waivers contained in the prenuptial agreement and mutually released and waived all rights that [Dan] and Leone had to each other's estate”

Dan and Leone “allegedly reconciled without divorcing” just prior to Dan death. No beneficiary changes were made to Dan's NYSERS death benefit after Leone was allegedly named the sole beneficiary in 1998.

Following Dan’s death, however, the NYSERS notified Leone that Dan’s designation naming her as the sole beneficiary was invalid and that the System intended to disburse the death benefit to the children in accordance with Dan's March 1998 designation.

Wendy, Dane and Danika sued, seeking a court order designating the children, Dane and Danika, as the joint irrevocable beneficiaries of Dan's NYSERS's death benefit in compliance with the matrimonial settlement agreement and to remove Leone as a beneficiary.

Supreme Court determined that Leone and the children were each entitled to one-third of Dan's NYSERS death benefit notwithstanding Leone claim that the System erred in determining that the designation naming her as sole beneficiary was invalid.

The Appellate Division said that it agreed with Wendy, Dane and Danika that that Leone was not entitled to any part of decedent's retirement plan death benefit and reversed Supreme Court’s decision to the contrary.

The court explained that “The matrimonial settlement agreement clearly required [Dan] to name the children as the ‘joint irrevocable designated beneficiaries’ of his retirement plan death benefit.” Accordingly, said the court, Dan did not have the authority to name any other person as a partial or sole beneficiary of such death benefit.

Further, the Appellate Division held that Leone whatever right to such a benefit she would have acquired by virtue of being married to Dan “was waived by the prenuptial and separation agreements.”

Noting that Retirement and Social Security Law §803-a, provides that "the comptroller is hereby authorized ... to change or correct ...[a] beneficiary consistent with a subsequent order by a court of competent jurisdiction ...," the Appellate Division rejected Leone’s argument that the statute does not apply because it was not enacted until after Wendy and Dan divorced, ruling that. Wendy’s, Dane’s and Danika’s action against Leone was not dependant on the existence of that statute. Rather, said the court, §803-a “merely eliminated the need for the Legislature to pass a specific bill with respect to each case to achieve the same result,” citing the contents of the Bill Jacket for Chapter 300 of the Laws of 1999.

The decision is posted on the Internet at: