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A Better Partnership


Mar 2009
March 23, 2009

Supreme Court Says Beneficiary Designation Trumps Waiver in Divorce Decree

The Supreme Court, in a rare unanimous opinion, has held that a former spouse's waiver of her interest in her ex-spouse's retirement plan benefits through a divorce decree was not effective because it conflicted with the retirement plan's express terms for designating beneficiaries and waiving benefits.

Case Facts

The facts in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan should be familiar to most plan administrators. William Kennedy participated in his employer's savings and investment plan (SIP). The SIP required participants to make all beneficiary designations in the manner prescribed by the plan administrator. The plan administrator created specific forms for naming/revoking a beneficiary. William Kennedy originally designated Liv Kennedy, his wife, as his beneficiary. William and Liv subsequently divorced. In the divorce decree, Liv waived all rights to her interest in William's retirement and pension benefits. William never removed Liv as his beneficiary under the SIP. When William died, the plan administrator paid his entire SIP account to Liv in accordance with his beneficiary designation form on file, rather than to William's estate. The estate sued, claiming that the divorce decree amounted to a waiver of the SIP benefit on Liv's part, and that the plan administrator violated the Employee Retirement Income Security Act of 1974, as amended (ERISA), by paying the benefits to William's designee, Liv.

Supreme Court Decision

The Supreme Court found that ERISA establishes a "bright-line requirement to follow plan documents in distributing benefits." Under the terms of the SIP, Liv was William's designated beneficiary. The SIP provided an easy way for William to change his beneficiary, but he did not. The SIP provided a way for Liv to disclaim her interest in William’s SIP account, but Liv did not follow it. The Supreme Court, therefore, held that the plan administrator did its statutory ERISA duty by paying benefits to Liv in accordance with the plan documents.

Next Steps for Plan Administrators

  • Review Plan Documents and Forms. Plan administrators should review their plan documents, including SPDs and forms, to ensure that they clearly describe the process for naming/revoking a beneficiary. Generally, this means the documents should put participants on notice of the need to submit a new beneficiary designation form when they divorce in order to remove a former spouse as a beneficiary. Note that some plans provide for the automatic revocation of a designation of a participant's spouse as the participant's beneficiary upon their divorce. For those plans, the plan documents should notify participants of the effect of a divorce upon a beneficiary designation, specify the default beneficiary if no further action is taken, and describe the process for determining a deceased participant’s marital status before benefits will be distributed.

  • Adopt Formal Waiver Procedure. Under Kennedy, a beneficiary may waive his right to a participant’s benefits without violating ERISA's anti-alienation rule, but the waiver must comply with the plan's waiver procedure. Accordingly, plan administrators may want to consider adopting a formal waiver procedure.

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