Will the Supreme Court Reinforce or Undermine Basic ERISA Principles When it Decides a Death Benefit Dispute?

Abstract

In Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, (argued Oct. 7, 2008) (No. 07-636) the Supreme Court will decide whether a participant's divorcing spouse may waive her entitlement to the participant's death benefit without using a Qualified Domestic Relations Order (QDRO). This article was prepared before the Supreme Court decision in Kennedy v. DuPont Savings and Investment Plan, 2009 U.S. LEXIS 869 (January 26, 2009). My brief commentary on such decision entitled A Unanimous ERISA Decision by the Supreme Court Raises Troubling Questions, appears at http://ssrn.com/abstract=1336350.

ERISA addresses benefit disputes between two persons claiming to be a beneficiary. Plan terms determine who has the entitlement. Where the plan terms do not permit a waiver such as the one at issue, the waiver is not effective. Furthermore, the statutory prohibition against the alienation of benefits requires that pension plan terms permit QDROs to determine benefit entitlements, but prohibits them from using a domestic relations order other than a QDRO, such as the one at issue, to determine benefit entitlements. Thus, pension plans must disregard settlements between the parties, whether or not incorporated in court orders or voluntary agreements, except to the extent the settlement is part of a QDRO.

Finally, the article suggested it would be useful for the Supreme Court to reaffirm in this decision the Court's consistent holdings that ERISA protects the right both to receive and to keep employee benefits. Thus, no one may force a person entitled to an ERISA plan benefit to pay another the amount of the benefit, unless the plan authorizes such payment. Such authorization may exist if the plan, unlike most pension and life insurance plans, permits the assignment of benefits. There may be such authorization if a plan, unlike most pension and life insurance plans, permits the assignment of benefits. This protection applies to all ERISA plans, both pension and welfare plans, and to all plan participants and beneficiaries, whether they are rich, poor, deserving, or greedy.

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

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