A Unanimous ERISA Decision by the Supreme Court Raises Troubling Questions

Abstract:     
In Kennedy v. DuPont Savings and Investment Plan (the "DuPont Plan"), 2009 U.S. LEXIS 869 (January 26, 2009), the Supreme Court decided that if a voluntary disclaimer in a domestic relations order ("DRO") by the divorcing spouse of an ERISA pension plan participant did not comply with the terms of the governing plan documents, the plan could pay the death benefit only to the participant's designee, who was the former spouse and disclaimant. The Court agreed with the former spouse that her disclaimer was ineffective. Thus, the plan administrator correctly denied the claim of the participant's default designee. The decision raises at least seven troubling questions for family law practitioners, ERISA practitioners, ERISA plan sponsors, administrators, participants and administrators.

1) May Pension Plans Defer to Disclaimers by Separating or Divorcing Spouses?

2) May Pension Plans Defer to Divorcing and Separating Spouses Who Seek to Retain Survivor Benefits?

3) May a Pension Plan Be Obligated to Make a Double Benefit Payment Following a Divorce or Marital Separation?

4) Must Pension and Life Insurance Plan Administrators Defer to Disclaimers by Separating or Divorcing Spouses if the Plans Do Not Otherwise Permit Disclaimers by Such Individuals?

5) If Pension and Life Insurance Plan Administrators May Not Defer to Disclaimers by Separating or Divorcing Spouses, May the Participant's Default Designee Use State Law to Obtain the Benefit from the Disclaimant?

6) Must Pension Plan Administrators Defer to QDROs Or Any Other ERISA Requirements if the Plan Documents Do Not Provide for such Deference?

7) Does ERISA Permit Benefit Claims by Participants and Beneficiaries in Plans, Such as Top-Hat Plans, Which are not Subject to the General Fiduciary Rules?

Many of these issues are discussed more extensively in "Will the Supreme Court Reinforce or Undermine Basic ERISA Principles When it Decides a Death Benefit Dispute," 3 Charleston L. Rev. 289 ( 2009), prepared before the decision which is available at http://ssrn.com/abstract=1337276.

Keywords: ERISA, survivor, benefit claim, marital, Supreme Court, QDRO, divorce, retirement benefits, benefit designations, life insurance, pension

JEL Classifications: J12, J32, K31, K32, M52

Working Paper Series