Did a Unanimous Supreme Court Misread ERISA, Misread the Court's Precedents, Undermine Basic ERISA Principles, and Encourage Benefits Litigation?

Abstract:     
In Kennedy v. Plan Administrator of the DuPont Savings and Investment Plan (the “Kennedy Decision”), a unanimous Supreme Court appeared to proclaim a “bright-line rule” that plan documents determine benefit distribution rights. However, by misreading ERISA and its own precedents, the Supreme Court needlessly undermined basic ERISA principles with respect to the determination and the protection of ERISA benefit entitlements, the coverage of the prohibition on the alienation of pension benefits (the “Alienation Prohibition”) and the rules pertaining to QDROs.

The Court thereby laid the groundwork for considerable benefit litigation, much of which could have been avoided, focusing on issues such as
• the effectiveness of benefit waivers (including, but not limited to, disclaimers) that are not QDROs for the many ERISA plans that have no disclaimer provisions;
• the effect on benefit entitlements of various disclaimer provisions in the governing documents of ERISA plans;
• the requirements for a domestic relations order (“DRO”) to be a QDRO;
• the effect on benefit entitlements of ERISA plans not subject to the Alienation Prohibition, such as a life insurance plan or a top-hat plan, of a DRO that “satisfies” the QDRO requirements;
• the effects of revocation upon divorce provisions for pension plans subject to the Alienation Prohibition; and
• the effect of ERISA on the determination and protection of entitlements to distributed ERISA benefits.

Much of this litigation would be tamped down if the Treasury Department amended the Treasury Regulations to clarify (1) the significance of the Alienation Prohibition, such as its applicability to disclaimers, waivers and levies, and (2) the significance of the QDRO requirements. The article proposes draft regulatory language to achieve those goals.

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