The Kennedy Supreme Court Giveth with Footnote 13, But Taketh with Footnote 10: The Department of Labor and Many Lower Courts Miss the Decision's Ultimate Meaning
Law Offices of Albert Feuer
June 3, 2011
Compensation Planning Journal, Vol. 39, p. 111, June 3, 2011
In Kennedy v. Plan Administrator of the Du Pont Savings and Investment Plan (“Kennedy Decision”) the U.S. Supreme Court unanimously held that an ERISA plan, was not required to pay the participant’s death benefits to his contingent beneficiary, even though the participant's primary beneficiary, who was his former spouse, had waived her interest in those benefits in their divorce decree. The Court based its holding that the waiver could not be enforced against the former spouse on the failure of the waiver to comply with the terms and conditions of the governing documents of the ERISA plan.
Two of the Supreme Court footnotes created considerable confusion about the application of the Kennedy decision by making it difficult for the former spouses in these circumstances to be paid or to keep the death benefits.
In footnote 13 the Court declared it was not deciding whether a voluntary waiver by a participant’s former spouse of ERISA plan benefits in the order of their marital dissolution would be effective if the plan had no provisions permitting the former spouse to waive benefit entitlements. In footnote 10 the Court declared it was not deciding whether a waiver of ERISA plan benefits by a participant’s former spouse, in the order of their marital dissolution, deprives the former spouse of the right to keep the participant’s death benefits he or she may receive as the participant’s designee pursuant to the terms of such a plan.
The lower courts and the U.S. Department of Labor have used Footnote 13 to determine that spousal waivers in orders of marital dissolutions must be disregarded even if the governing documents of an ERISA plans do not provide for any non-statutory disclaimers. However, it is most consistent with footnote 13, and the emphasis the Kennedy Decision places on the substantial burden that would be imposed on beneficiaries who may not disclaim benefits, to find that the general Kennedy disregard of spousal disclaimers in orders of martial dissolution is inapplicable in such cases. It would thus not be surprising if the holdings become more confusing as future courts, unlike the initial courts, defer more to the thrust of the Kennedy decision and prevent such former spouses from receiving benefit distributions.
Former spouses, who made common-law disclaimers, but claimed benefits as designees, may find their victories against the plans rather ephemeral. Footnote 10 suggests that the Supreme Court may reverse its holdings in Boggs v. Boggs or Egelhoff v. Egelhoff that ERISA protects the right of beneficiaries to retain the ERISA benefits to which they are entitled and which they have received. However, the lower courts have again failed to provide good reasons for the Supreme Court to reverse itself. Thus, again confusion may result as some but not all decide to give more deference to the actual Supreme Court decisions rather than a reversal that may occur in the future.
Number of Pages in PDF File: 15
Keywords: ERISA, QDRO, domestic relations, disclaimer, designation, beneficiary, alimony, spousal, divorce, marital dissolution
JEL Classification: H89, J32, J33, K31, K34, K49, M52Accepted Paper Series
Date posted: June 8, 2011 ; Last revised: September 28, 2012
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