Supreme Court: Divorce Decree not Good Enough to Prevent Distribution to Former Spouse
Posted on January 28th, 2009 by Chad De Groot | 1 Comment »Filed under: ., Employee Benefits, HR Issues |
On Monday, the Supreme Court unanimously ruled that a plan administrator must act in accordance with plan documents in determining who is a proper beneficiary under a plan even though that beneficiary previously waived his/her rights to a benefit under the plan via divorce decree.
Kennedy v. Plan Administrator for DuPont Savings and Investment Plan has a fact pattern that is quite common in the HR realm, and a decision that should be heeded by all plan administrators. Mr. Kennedy was a participant in the DuPont Savings and Investment Plan. Under the plan, Liv Kennedy, his wife at the time, was named beneficiary. The two were later divorced and under the divorce decree Liv waived her rights as beneficiary under the plan. Mr. Kennedy, however, never changed his beneficiary designation under the plan prior to his death. Following his death, Mr. Kennedy’s daughter, as executrix of his estate, requested that the assets of his account under the plan be distributed to the estate. The plan administrator, however, relying on the plan documents and the beneficiary designation thereunder, paid the benefits to Liv.
The Court held that because a plan administrator has a duty, in accordance with Section 404(a)(1)(D) of ERISA (29 U.S.C. 1104 for you labor people), to administer a benefits plan in accordance with the plan documents, and the plan documents, or Mr. Kennedy’s beneficiary designation, named Liv as his beneficiary, the plan administrator was acting in accordance with the plan documents when it distributed Mr. Kennedy’s assets to Liv, even though they had divorced.
Although the outcome seems unfair, it is a necessary one to ensure consistent plan interpretation and operation. Mr. Kennedy had every opportunity to change that beneficiary designation. Although the divorce decree may have led him to believe that the beneficiary designation would be voided, the onus of determining proper beneficiaries cannot be put on the plan administrator. To do so would require every plan administrator to shoulder the additional burden of determining a deceased participant’s intent irrespective of his beneficiary designation.
“Although the divorce decree may have led him to believe that the beneficiary designation would be voided, the onus of determining proper beneficiaries cannot be put on the plan administrator.”
But that’s the point – he’s just a regular person. He doesn’t know that something the judge signs that supposed to end his marriage won’t end his marriage everywhere. I understand that the administrator can’t worry about things he doesn’t even know about, but the onus be on the lawyer or the judge to make sure that the decree gets acknowledged properly, instead of the guy who doesn’t know anything about the law.
4:48 pm on February 16th, 2009.