The opinion of the court was delivered by: RAYMOND J. BRODERICK
Presently before the Court are plaintiffs Lisa Nassar Stickney and George J. Nassar's motion for summary judgment, counterclaim/interpleader defendant Hiyam N. Nassar's crossclaim for partial summary judgment, and defendants TIAA/CREF's motion for discharge in interpleader and for attorneys' fees.
On August 5, 1994, plaintiffs Lisa Nassar Stickney and George J. Nassar commenced the present lawsuit pursuant to the Employee Retirement Income Securities Act of 1974, 29 U.S.C.A. 1132 ("ERISA"), claiming entitlement as beneficiaries to all death benefits accumulated by their father, John I. Nassar, under annuity and life insurance contracts with defendants Teacher's Insurance and Annuity Association of America ("TIAA") and College Retirement Equities Fund ("CREF"), and additionally, costs and attorneys' fees pursuant to 29 U.S.C.A. § 1132(g).
This court has jurisdiction pursuant to ERISA, 29 U.S.C.A. §§ 1001, et seq., which has broad application to any employee benefit plan established or maintained by an employer engaged in commerce. 29 U.S.C.A. § 1003(a). ERISA further defines "employee benefit plan" or "plan" as an "employee welfare benefit plan or an employee pension benefit plan or a plan which is both an employee welfare benefit plan and an employee pension benefit plan." 29 U.S.C.A. $ 1002(3). See §§ 1002(1) and (2). ERISA shall "supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. . ., " and its civil enforcement provisions were intended by Congress to be matters of exclusive federal concern. 29 U.S.C.A. § 1144(a); Pilot Life Insurance Company v. Dedeaux, 481 U.S. 41, 54, 95 L. Ed. 2d 39, 107 S. Ct. 1549 (1987).
On February 23, 1995, counterclaim/interpleader defendant Hiyam N. Nassar, the deceased's second wife, filed a crossclaim for partial summary judgment, seeking entitlement to all or a portion of the proceeds as well, on the bases that she is the surviving spouse of the deceased and entitled to the benefits pursuant to the Retirement Equity Act of 1984, codified at 29 U.S.C.A. § 1055, or alternatively, as the beneficiary of John Nassar's TIAA and CREF annuity contracts and TIAA collective life insurance policy. In her motion, crossclaim/interpleader defendant Hiyam N. Nassar requests partial summary judgment, awarding her all of the proceeds contributed to the TIAA/CREF Plans, subsequent to August 23, 1984, pursuant to the Retirement Equity Act of 1984; or alternatively, partial summary judgment, awarding one-half of the proceeds contributed to the TIAA/CREF Plans, subsequent to August 23, 1984, and a trial on the issue of the change of beneficiary by John I. Nassar, as to all funds which are not awarded to Hiyam N. Nassar.
Lastly before the court is defendants TIAA/CREF's motion for discharge in interpleader and for costs and attorneys' fees in connection with this action. TIAA/CREF assert that their total expenses and attorneys' fees in connection with the interpleader action, which through May, 1995 amounted to $ 450.89 and $ 7,183.50, respectively, should be assessed against the proceeds of the annuities and/or insurance contract which TIAA/CREF paid into the registry of this court. On June 23, 1995, TIAA/CREF deposited $ 609,204.28, the entire proceeds, including interest, attributable to CREF annuity contract PO48790-7. On this same date TIAA/CREF deposited $ 221,270.58, the entire proceeds, including interest, attributable to TIAA annuity contract A128372-8. Moreover, on June 27, 1995, TIAA/CREF deposited $ 3,562.36, the entire proceeds, including interest, attributable to TIAA Collective Life Insurance Policy GO76O145. Thus, the entire sum presently in the registry of the court amounts to $ 834,037.22.
The threshold legal issue before this court appears to be one of first impression. The fundamental question at issue is: What is the "plan" referred to in 29 U.S.C.A. § 1055(e)(2) of the Retirement Equity Act of 1984 ("REACT")? This section provides:
In the case of any individual account plan or participant . . . the term 'qualified preretirement survivor annuity' means an annuity for the life of the surviving spouse the actuarial equivalent of which is not less than 50% of the portion of the account balance of the participant (as of the date of death) to which the participant had a nonforfeitable right.
29 U.S.C.A. § 1055(e)(2).
Concerning the above quoted provision of REACT, § 303(c)(1) of the Transitional Rules enacted by Congress in 1984 provide:
(c) Requirement of joint and survivor annuity and preretirement survivor annuity.--
(1) Requirement that participant have at least 1 hour of service or paid leave on or after date of enactment.--The amendments made by sections 103 and 203 [amending the rules under ERISA and the parallel provisions under the Internal Revenue Code] shall apply only in the case of participants who have at least 1 hour of service under the plan on or after the date of enactment of this Act [Aug. 23, 1984] or have at least 1 hour of paid leave on or after such date of enactment [Aug. 23, 1984].
Retirement Equity Act, Pub.L. No. 98-397, § 303(c)(1), 98 Stat. 1451 (codified as a historical note to 29 U.S.C.A. § 1001).
For the reasons set forth herein, upon consideration of the parties' motions, plaintiffs Lisa Nassar Stickney and George J. Nassar's motion for summary judgment will be GRANTED IN PART, entitling them to 50% of the account balance pursuant to contributions made to the TIAA/CREF annuity contracts during the period the deceased was employed at Muhlenberg College, the amount of said judgment to be determined at trial; plaintiffs Lisa Nassar Stickney and George J. Nassar's motion for summary judgment will be GRANTED IN PART in the amount of $ 3,562.36, the amount representing 100% of the TIAA collective life insurance policy; and counterclaim/interpleader defendant Hiyam N. Nassar's motion for partial summary judgment will be GRANTED IN PART, entitling her to 50% of the account balance pursuant to contributions made to the TIAA/CREF annuity contracts during the period the deceased was employed at Muhlenberg College, the amount of said judgment to be determined at trial. Defendants TIAA/CREF's motion for discharge in interpleader and for costs and attorneys' fees as well as plaintiffs Lisa Nassar Stickney and George J. Nassar's motion for attorneys' fees will be considered at the trial, and the Court will issue its ruling on these motions after a final resolution of the merits.
The instant action results from the death of John I. Nassar ("the deceased"), on January 18, 1994. Beginning in 1966 and until his death, the deceased was a professor of mathematics and employee of Muhlenberg College. Before his tenure at Muhlenberg, the deceased was employed by Lehigh University and the American University in Beirut.
TIAA is a New York non-profit, legal reserve life insurance company which provides fixed retirement annuities, group insurances and individual and collective life insurance to institutions of higher education. It was organized under New York law in 1918 by the Carnegie Foundation for the Advancement of Teaching which conducted a study of the need for pensions for individuals in higher education. See Peters v. Wayne State University, 476 F. Supp. 1343, 1346 (E.D. Mich. 1979), rev'd on other grounds, 691 F.2d 235 (6th Cir. 1982). The Foundation recognized that "a college retirement system should rest upon the cooperation and mutual contributions of the colleges and teachers," and " the greatest freedom of movement of the college teacher from one college to another should be provided for." Id. In 1952, the New York State Legislature created CREF, a companion not-for profit organization, which issues individual, variable retirement annuities to those employees who are eligible for TIAA contracts. At present TIAA/CREF is the funding vehicle for over one million employees affiliated with over 4,500 institutions of higher education. See Stephen R. Bruce, Pension Claims: Rights and Obligations 25 (2nd ed. 1993).
Under the TIAA/CREF system, each employee has an individual annuity contract directly with TIAA/CREF. The educational institution matches its employees' contributions, remitting both contributions to TIAA/CREF which then manages the funds. All contributions, including interest, are immediately credited to the employee's individual account as they accumulate. See Spirt v. Teachers Insurance and Annuity Association, 691 F.2d 1054, 1057 (2nd Cir. 1982). An additional characteristic of TIAA/CREF, and the heart of the legal issue involved in the present case, is the concept of "portability," which Spirt defines:
Of course, the Second Circuit decided Spirt prior to 1984 when Congress enacted REACT.
Defendant TIAA issued an individual fixed type retirement annuity contract to the deceased on October 1, 1958, as well as a collective life insurance policy on September 1, 1966. In addition, on October 1, 1958, defendant CREF issued an individual, variable retirement annuity contract to the deceased. Unfortunately, the deceased died on January 18, 1994, prior to the annuity starting date of March 1, 1994.
When the deceased entered into the annuity contracts with TIAA/CREF, he was married to his first wife, Mary, with whom he had two children, the plaintiffs, Lisa and George. According to the records of TIAA/CREF, the deceased designated Lisa and George as primary beneficiaries on a form signed by the deceased on May 31, 1977. Paragraph 19 of the General Provisions of both the TIAA and CREF annuity contracts indicates the participant may change the beneficiary "by filing written notice with TIAA [CREF] at its home office in form satisfactory to TIAA [CREF]" and no "change will take effect unless received by TIAA [CREF] at its home office." Paragraph 10 of the collective life insurance contract contains identical language.
There is no dispute that the deceased and his employers paid premiums to TIAA and CREF from October 1, 1958 until the time of the deceased's death. Moreover, it is undisputed that TIAA held the life insurance proceeds which it was liable to pay to the deceased's beneficiary. However, defendants TIAA/CREF did not discharge their admitted liability in response to plaintiffs Lisa Nassar Stickney and George J. Nassar's original request for the entire sum of the TIAA/CREF funds as the beneficiaries of the death benefit because TIAA/CREF alleged that Hiyam N. Nassar, ...