ERISA Preemption of State Power of Attorney Laws and the Role of Powers of Attorney in ERISA Plan Administration

ERISA is a federal law that generally regulates employee welfare and retirement benefit plans.⁴ Among other things, Title I of ERISA establishes fiduciary standards for the administration and investment of plans, requires a claims procedure for disputes involving plan benefits, creates a civil cause of action for plan participants and beneficiaries to enforce its substantive rules or to enforce the terms of the plan, gives federal courts jurisdiction over benefits-related disputes, and, importantly, provides for preemption of state laws relating to employee benefit plans.⁵ A central purpose of ERISA is to allow plan administrators to apply uniform laws of administration nationwide.⁶

ERISA preemption of state power of attorney laws could create stumbling blocks for clients of trust and estate attorneys. The result could be particularly disruptive for the client if the plan receives the power of attorney after the principal has become incapacitated,⁷ as with a durable power of attorney. The potential problems raised by this issue are more significant now than they previously were as the durable power of attorney has become a widely used estate planning tool.

A durable power of attorney provides an inexpensive method for the elderly to make provision for their care in anticipation of their incapacity for reasons such as old age, disease, or other causes.⁸ As the population ages and clients accumulate more assets in their ERISA-covered plans, a durable power of attorney can be of tremendous value to ERISA plan participants. Clients who expect to rely on a durable power of attorney to address their needs after they become incapacitated will want to know whether ERISA may limit the use of the durable power of attorney.

In the abstract, asking whether ERISA preempts state power of attorney laws is not helpful. The real question is whether state law can compel a plan to accept the instructions of an attorney-in-fact. This Article explores this question in the context of five areas of plan operations: disclosure requests under Part 1 of Title I of ERISA (for example, excluding disclosures under HIPAA),⁹ benefit claims, participant-directed investments, waiver of the survivor annuity,¹⁰ and beneficiary designations. Other matters involving a plan’s operations, such as enrollment, electing benefits options (for example, Health Maintenance Organization or Preferred Provider Organization, and single or family coverage), or selecting plan contributions, will less often require the use of a power of attorney. In those circumstances, the participant usually is not only competent but also working.

Part II examines powers of attorney. Part III reviews ERISA preemption, and Part IV covers the ERISA complete preemption doctrine. Part V analyzes the potential impact of ERISA preemption on state power of attorney laws. In Part VI, the analysis focuses on the objectives of ERISA in the context of the five areas of plan operations listed above. Part VII reviews the potential impact of ERISA complete preemption on remedies available under state power of attorney laws. Part VIII addresses issues that plan sponsors or fiduciaries should consider when adopting a power of attorney policy. Part IX sets forth conclusions.

Importantly, there are other ways a participant’s representative could be recognized or appointed that this Article does not cover. These include court-appointed guardians, conservators, persons acting in loco parentis for the participant (or more often, for the beneficiary),¹¹ guardian ad-litems, attorneys at law, and the administrator or executor of the part-icipant’s estate.¹² Rather, this Article focuses on only powers of attorney.

II. Powers of Attorney

A Definitions

“Power of attorney” means “an instrument by which the authority of one person to act in the place and stead of another as attorney in fact is set forth.”¹³ It is a “written instrument by which one person, the principal, appoints another, the attorney-in-fact, as agent and confers on the attorney-in-fact the authority to perform specified acts on behalf of the principal.”¹⁴ Modern statutes governing powers of attorney arise from the common law of agency.¹⁵

“Three” is a magic number.¹⁶ The number three appears often where a power of attorney is concerned, including the parties that compose an agency relationship created in a power of attorney: “the principal, the agent, and the third party with whom the agent is to deal.”¹⁷ This Article uses the term “principal” to refer to the person granting the power of attorney (typically the plan participant or plan beneficiary), “agent” to refer to the attorney-in-fact, and “third party” to mean the plan, the plan administrator, or the plan trustee.

B. Three Types of Powers of Attorney

The number three again appears with the types of powers of attorney. There are many types of powers of attorney, but for simplicity, they can be classified into three categories: (1) a general (or ordinary) power of attorney, (2) a limited power of attorney, and (3) a durable power of attorney. A general power of attorney gives the agent authority to handle all the principal’s affairs.¹⁸ It may terminate on a date certain or the occurrence of an event, such as the closing of a stock purchase agreement.¹⁹ A power of attorney that only authorizes the agent to act on one or more specified matters is a limited power of attorney.²⁰ The agent is limited in the scope of authorized actions it may undertake for the principal.²¹

Both a general power of attorney and a limited power of attorney can be a durable power of attorney.²² Under a durable power of attorney, the agent’s authority survives if the principal becomes incapacitated after executing the instrument.²³ A durable power of attorney can also be a “springing power of attorney.”²⁴ A typical durable springing power of attorney is designed to take effect when the principal becomes incapacitated. Until that springing event occurs, the agent does not have authority under the durable power.

C. Three Important Issues Raised with a Power of Attorney

Powers of attorney also raise three important issues. First, is the principal competent, either when signing the power of attorney or at a later date? Second, what are the duties of the agent to the principal? Third, what are the duties of a third party that receives a power of attorney?

1. Is the Principal Competent?

A principal who is incompetent cannot create a valid power of attorney.²⁵ Lacking mental capacity, the principal also lacks contractual capacity.²⁶ A principal may generally only delegate the authority the principal has, and no more.²⁷ Thus, a principal cannot delegate contractual capacity when the principal has none. As a result, a power of attorney signed by one who is incompetent is void—not voidable—from the beginning.²⁸ A principal who is only partially incompetent may delegate authority to an agent to the extent the principal has capacity.²⁹

A principal who is competent when signing a power of attorney may later become incompetent. At common law, the agent did not have the authority to act under a power of attorney after the principal became incompetent.³⁰ Two commonly available alternatives, a guardianship or conservatorship, were judicially supervised and therefore relatively expensive. The National Conference of Commissioners on Uniform State Laws (NCCUSL) remedied this through a series of model acts designed to recognize the durable power of attorney.

Under section 104 of the Uniform Power of Attorney Act (UPA) (the most recent version of the NCCUSL Model Power of Attorney Act), all powers of attorney are by default durable unless the instrument provides otherwise.³¹ All states and the District of Columbia now recognize the durable power of attorney.

2. What are the Duties of the Agent to the Principal?

A power of attorney creates an agency relationship between the principal and agent.³² Generally, an agent owes a fiduciary duty to the principal.³³ Thus, the principal and agent for a power of attorney have a fiduciary relationship, and the agent owes the principal a fiduciary duty.³⁴

The fiduciary duties an agent owes the principal are now largely governed by state law. They generally include a duty of loyalty, a duty of care, a duty of disclosure, and a duty not to engage in self-dealing with the principal’s property without the knowledge of the principal.³⁵ The remedies available for a breach also depend on state law, and they further depend on the nature of the breach. Generally, remedies may include revocation of the power of attorney and removal of the agent, an action for an accounting, a claim for monetary relief, a constructive trust, or a surcharge.³⁶

3. What are the Duties of Third Party Receiving Power of Attorney/Remedies for Wrongful Refusal?

The duties imposed on third parties who receive a power of attorney normally depend on state law. State laws generally require third parties to accept validly executed powers of attorney.³⁷ Depending on the jurisdiction, third parties may take different actions to ensure the power of attorney is valid. For example, under the UPA, a third party may request (1) the agent to certify factual matters concerning the principal, the agent, or the power of attorney, or to certify the power of attorney remains in effect, (2) an English translation if the power is written in a foreign tongue, or (3) an opinion of counsel concerning the validity of the power of attorney.³⁸

The UPA has provisions that would relieve a third party from the duty to accept a power of attorney if acceptance would conflict with federal law.³⁹ Section 122 of the UPA provides that the UPA does not supersede “any other law applicable to financial institutions or other entities, and the other law controls if inconsistent with this [Act].”⁴⁰ Moreover, section 120(c)(2) of the UPA provides a person is not required to accept a power of attorney if “engaging in a transaction with the agent or the principal in the same circumstances would be inconsistent with federal law.”⁴¹ These provisions, if adopted by the applicable state, would make it less risky for plans to reject a power of attorney where acceptance would violate ERISA. The absence of case law on whether ERISA preempts state power of attorney laws might make it difficult for a plan to conclude on which side of the ERISA-preemption fence state power of attorney laws fall. It is much easier to identify when acceptance of a power of attorney would violate ERISA, without engaging in a preemption analysis.

Remedies for a wrongful refusal to accept a power of attorney differ from jurisdiction to jurisdiction. Under the UPA, the remedies are (1) a court order compelling acceptance of the power and (2) payment of attorneys’ fees and costs incurred in a proceeding that confirms the validity of the power or compels acceptance.⁴² In New York, the remedy is limited generally to a court order determining the validity of the power, determining the scope of the power, or compelling acceptance.⁴³ In Pennsylvania, the third party could be liable for “civil liability for pecuniary harm to the economic interests of the principal proximately caused by the person’s refusal to comply with the instructions of the agent designated in the power of attorney” or “a court order mandating acceptance of the power of attorney.”⁴⁴ In Illinois, a third party may be subject to civil liability for damages resulting from the wrongful refusal of the power of attorney.⁴⁵ Indiana potentially subjects a third party to three times the actual damages, attorneys’ fees, and prejudgment interest.⁴⁶

D. Not All Authority Can be Delegated with a Power of Attorney

Even with a general power of attorney, whether or not durable, principals cannot give carte-blanche authority to their agents by delegating performance of every act the principal could perform.⁴⁷ Rather, a principal may delegate performance of an act to the agent when the legal con-sequences for the principal are the same whether the principal or the agent performs the act.⁴⁸ However, a principal may not delegate performance of an act to the agent if personal performance is required.⁴⁹ Similarly, a power of attorney generally may not delegate an authority if the delegation is contrary to public policy or a statute.⁵⁰

In determining whether an act is delegable, some courts look to guidance from prior Restatements:

Section 17. What Acts are Delegable

A person privileged, or subject to a duty, to perform an act or accomplish a result can properly appoint an agent to perform the act or accomplish the result, unless public policy or the agreement with another requires personal performance; if personal performance is required, the doing of the act by another on his behalf does not constitute performance by him.⁵¹

III. ERISA Preemption

A. Overview of Federal Preemption

Federal law will preempt state law under the Supremacy Clause of the United States Constitution “by express provision, by implication, or by a conflict between federal and state law.”⁵² Thus, the United States Supreme Court has identified different types of preemption: conflict, express, and field.⁵³ These three types of preemption “work in the same way: Congress enacts a law that imposes restrictions or confers rights on private actors; a state law confers rights or imposes restrictions that conflict with the federal law; and therefore the federal law takes precedence and the state law is preempted.”⁵⁴ However, despite these opportunities for federal preemption of state law, courts start with the presumption that Congress does not intend to preempt state law.⁵⁵

1. Express Preemption

Express preemption exists when a statute expressly includes a preemption clause. “Congress can define explicitly the extent to which its enactments pre-empt state law.”⁵⁶ Thus, when a statute includes an express preemption clause, a court will determine whether Congress intended federal law to preempt state law by focusing on the plain wording of the clause.⁵⁷

2. Conflict Preemption

Under conflict preemption, federal law preempts state law to the extent that state law actually conflicts with federal law.⁵⁸ Thus, conflict preemption occurs when a private party cannot comply with both state and federal law or when state law prevents “the accomplishment and execution of the full purposes and objectives of Congress.”⁵⁹

3. Field Preemption

Field preemption exists when state law seeks to “regulate[] conduct in a field that Congress intended the Federal Government to occupy exclusively”;⁶⁰ thus, “federal law occupies [the] field so comprehensively that it has left no room for supplementary state legislation.”⁶¹ In deciding whether a state law (or cause of action) is susceptible to field preemption, one factor the Court considers is whether the federal law “was drawn with meticulous regard for the continued exercise of state power, not to handicap or dilute it in any way.”⁶²

4. Presumption of No Preemption

Even though courts have three methods to determine whether federal law preempts state law, courts start with the presumption that Congress does not intend to preempt state law.⁶³ Indeed, when field preemption arguably may apply, courts assume “the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.”⁶⁴ Moreover, when an express preemption clause is at issue, and that clause is open to more than one “plausible reading,” courts generally choose the reading that disfavors preemption.⁶⁵ Similarly, a presumption of no preemption applies for field preemption, but that presumption will not be triggered when state law seeks to regulate in a field “where there has been a history of significant federal presence.”⁶⁶

Murphy v. National Collegiate Athletic Ass’n⁶⁷ elucidates that preemption involves an equilateral triangle of the three preemption doctrines with each doctrine forming equal angles and equal sides.⁶⁸ In demarking the scope of ERISA preemption, however, both Congress and the courts may be trying to fit an irregular polygon into this triangle.

B. ERISA Preemption

ERISA includes an express preemption clause in section 514(a). Under section 514(a), “the provisions of [Titles I and IV of ERISA] . . . supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan . . . .”⁶⁹ A state law relates to an ERISA plan if it “has a connection with or reference to such a plan.”⁷⁰ A state law has an impermissible connection with an ERISA plan if the state law “governs . . . a central matter of plan administration or interferes with nationally uniform plan administration.”⁷¹ A state law impermissibly references a plan if it “acts immediately and exclusively upon ERISA plans . . . or where the existence of ERISA plans is essential to the law’s operations.”⁷²

For example, in Gobeille v. Liberty Mutual Insurance Co.⁷³ the Court considered a state statute that required ERISA health plans to report claim payments and enrollment information to the State of Vermont.⁷⁴ The Court found the Vermont statute was preempted due to its impermissible connection with ERISA plans.⁷⁵ In doing so, the Court held a state law has an impermissible connection with an ERISA plan if the state law “governs . . . a central matter of plan administration or interferes with nationally uniform plan administration.”⁷⁶

The Court’s connection analysis in Gobeille looks very much like a field preemption inquiry. The Court found ERISA imposes extensive reporting and disclosure requirements on health plans, and it authorizes the Secretary of Labor to establish additional reporting requirements.⁷⁷ It further found ERISA’s reporting and disclosure requirements to constitute a central matter of plan administration.⁷⁸ Because the Vermont statute intruded upon this scheme of administration, it interfered with the plan’s nationally uniform administration.⁷⁹

Although the statutory “relate to” language has been described as “clearly expansive,” it is not limitless.⁸⁰ As the Supreme Court has explained, “If ‘relate to’ were taken to extend to the furthest stretch of its indeterminacy, then for all practical purposes pre-emption would never run its course.”⁸¹ The Court has said preemption does not apply where state laws “affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law ‘relates to’ the plan.”⁸² In N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co.,⁸³ the Court said this “too tenuous” rule applies in “the case [of] many laws of general applicability.”⁸⁴

For example, in De Buono v. NYSA-ILA Medical and Clinical Services Fund,⁸⁵ the Court concluded that ERISA did not preempt a New York law titled the Health Facility Assessment (HFA), which assessed against hospitals a tax on their gross receipts,⁸⁶ when the actual operation of the state statute increased the administrative burden on the ERISA plan but did not “relate to” the plan.⁸⁷ The Court ruled that “any state tax, or other law, that increases the cost of providing benefits . . . will have some effect on the administration of ERISA plans, but that simply cannot mean that every state law with such an effect is preempted by [ERISA].”⁸⁸ The Court further concluded “that the HFA is one of ‘myriad state laws’ of general applicability that impose some burdens on the administration of ERISA plans but nevertheless do not ‘relate to’ them within the meaning of [ERISA].”⁸⁹

However, a state law need not target ERISA plans to be preempted. ERISA preempts state laws not directed at ERISA plans if the state law would provide an alternative enforcement mechanism to ERISA’s exclusive civil enforcement scheme.⁹⁰ The Supreme Court has held that “any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear cong-ressional intent to make the ERISA remedy exclusive and is therefore preempted.”⁹¹ Thus, ERISA preempts state common law actions for plan benefits based on fraud, negligence, breach of contract, unjust enrichment, and promissory estoppel.⁹² The Court does, however, distinguish between a law directed solely at ERISA plans and those that apply both to ERISA plans and non-ERISA plans.⁹³

Other state laws are preempted if they conflict with ERISA, even if the law may not “relate to” an ERISA plan. In Boggs v. Boggs,⁹⁴ the Court held that under the conflict preemption doctrine, ERISA preempted a Louisiana law that would permit a nonparticipant spouse to bequeath to her children her community property interest in an ERISA plan.⁹⁵ Other state laws not directed at ERISA plans but found to be preempted include laws governing the coordination of benefits for insurance policies and the release of liens in a tax sale.⁹⁶

In Egelhoff v. Egelhoff,⁹⁷ the Supreme Court held that ERISA preempted a Washington state statute that revoked a designation of beneficiary of a nonprobate asset upon a divorce because the state statute had an impermissible connection to an ERISA plan.⁹⁸ David Egelhoff died two months after his divorce from Donna Rae Egelhoff.⁹⁹ At David’s death, Donna Rae was listed as David’s beneficiary for the ERISA plans sponsored by his employer.¹⁰⁰ Under the laws of the State of Washington, where the couple lived, the designation of a spouse as the beneficiary of a nonprobate asset is revoked automatically upon divorce.¹⁰¹ David’s children from a previous marriage sued Donna Rae in state court, seeking to recover David’s benefits paid to Donna Rae under the beneficiary designation.¹⁰² They claimed the Washington statute nullified the beneficiary designation.¹⁰³ The question before the Court was whether ERISA preempts the Washington statute.¹⁰⁴

To answer the question, the Court applied the framework from Shaw v. Delta Airlines, Inc.,¹⁰⁵ asking whether the statute has “a connection with or reference to” an ERISA plan.¹⁰⁶ This in turn led the Court to look to the objectives of ERISA “as a guide to the scope of the state law that Congress understood would survive, as well as to the nature of the effect of the state law on ERISA plans.”¹⁰⁷

The Court found the Washington statute would have two effects. First, the statute would “bind[ ] ERISA plan administrators to a particular choice of rules for determining beneficiary status,” and “govern[ ] the payment of benefits, a central matter of plan administration.”¹⁰⁸ The Court found this to be an impermissible connection to an ERISA plan.¹⁰⁹ More specifically, the Court found it to be inconsistent with the requirements of ERISA, which requires plans to specify the basis from which payments are made, requires fiduciaries to exercise their duties in accordance with the plan document, and requires that beneficiaries be designated by the participant or by the terms of the plan.¹¹⁰

Even when state laws are preempted, the courts are permitted to follow federal common law in settling ambitious plan provisions. In Kennedy v. Plan Administrator for DuPont Savings & Investment Plan,¹¹¹ one issue the Court considered was whether a waiver of a plan benefit in a divorce decree was preempted by ERISA.¹¹² The Court found that recognizing a waiver in a divorce decree would not give effect to state law if the waiver could also be “treated as a creature of federal common law.”¹¹³ However, where federal common law is inconsistent with the terms of the plan document, the plan document governs, not federal common law.¹¹⁴

IV Complete Preemption and ERISA’s Limited Remedies

State law will not compel acceptance of a power of attorney absent an available state-law remedy that permits such injunctive relief. The potential state remedies are discussed in Part II.C.3. above, which can include an injunction that compels the third party to accept the power of attorney and monetary penalties.¹¹⁵ Monetary penalties are usually measured by the damages the third party caused for failing to follow the agent’s instructions.¹¹⁶ These remedies will not be available, however, if the state law claim is completely preempted by ERISA.

A. ERISA Complete Preemption

Part III.B. above discusses the “relate to” requirement for preemption. Complete preemption is different. Much has been written about the ERISA complete preemption doctrine.¹¹⁷ Only a brief overview is provided here.

ERISA complete preemption is a jurisdictional doctrine that converts a state-law claim into a federal question claim. Under 28 U.S.C. § 1441, a claim filed in state court over which a district court has original jurisdiction may be removed to federal court.¹¹⁸ Generally, federal courts have original jurisdiction under 28 U.S. § 1332 (diversity jurisdiction), and under 28 U.S.C. § 1331 for cases “arising under the Constitution, laws, or treaties of the United States” (also called a “federal question”).¹¹⁹

To determine whether a complaint raises a federal question, courts look to the well-pleaded complaint rule.¹²⁰ Under that rule, “federal jurisdiction exists only when a federal question is presented on the face of the plaintiff’s properly pleaded complaint.”¹²¹ Complete preemption, including ERISA complete preemption, is an exception to the well-pleaded complaint rule.¹²²

Under this doctrine, the “preemptive force” of a federal statute “is so powerful as to displace entirely any state [law] cause of action . . . .”¹²³ Being displaced, the state law claim is converted “into an action arising under federal law” if the state claim also comes “within the scope of section 502(a) of ERISA.”¹²⁴ For example, a state law breach of contact claim that seeks a benefit payment from an ERISA plan is completely preempted and converted to a claim for benefits under ERISA section 502(a)(1)(B).¹²⁵

ERISA contains an exclusive enforcement mechanism that is “essential to accomplish Congress’ purpose of creating a comprehensive statute for the regulation of employee benefit plans.”¹²⁶ Once a court finds a state law claim completely preempted, the plaintiff is subject to this exclusive enforcement mechanism. That mechanism is in ERISA section 502(a).

ERISA section 502(a) contains “carefully integrated civil enforcement provisions . . . [that] provide strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly.”¹²⁷ The limited remedies available under ERISA are “an inherent part of the ‘careful balancing’ between ensuring fair and prompt enforcement of rights under a plan and the encouragement of the creation of such plans.”¹²⁸ Any actions based on ERISA must therefore be brought under section 502(a), and the remedies available in that action are limited by those provided by ERISA.

The relevant remedy provisions of section 502(a) can be found in ERISA sections 502(a)(1)(A), 502(a)(1)(B), 502(g), 502(a)(2), 502(a)(3). Under section 502(a)(1)(A), a participant may seek monetary penalties for a plan administrator’s failure to furnish certain documents after receipt of a written request.¹²⁹ A participant may bring an action under section 502(a)(1)(B) to enforce his rights under the terms of the plan or to clarify his rights to future benefits under the terms of the plan. A successful ERISA litigant may be awarded attorneys’ fees under ERISA section 502(g), in the discretion of the court. Under section 502(a)(2), a participant may bring a claim for a breach of fiduciary duties and cause the breaching fiduciary to restore plan losses caused by the breach or disgorge to the plan profits the fiduciary made through the use of plan assets.¹³⁰ ERISA section 502(a)(3) allows a participant to bring a civil action to enjoin any action that violates ERISA or the terms of the plan, to redress a violation of ERISA, or to enforce any provision of ERISA or the terms of the plan, but the relief under section 502(a)(3) is limited to “appropriate equitable relief.”¹³¹ Appropriate equitable relief is relief that is “typically available in equity,” which includes equitable remedies such as an “injunction, mandamus, and restitution, but not compensatory damages.”¹³² The Court may have broadened the type of relief that may be available under section 502(a)(3),¹³³ but absent an amendment to ERISA, it is doubtful that extra-contractual or punitive damages will be available under ERISA section 502(a)(3). ERISA’s limited remedial scheme often motivates defendants to argue for complete preemption and motivates plaintiffs to avoid complete preemption.

To determine whether ERISA completely preempts state law, the Court established a two-prong test in Aetna Health Inc. v. Davila.¹³⁴ The first prong asks whether the “individual, at some point in time, could have brought his claim under ERISA § 502(a)(1)(B).”¹³⁵ Noteworthy, courts have also applied this first prong to a suit brought under ERISA section 502(a)(3) for equitable relief in connection with a breach of fiduciary duty.¹³⁶ The second prong concerns whether “there is no other independent legal duty that is implicated by a defendant’s actions.”¹³⁷

The second prong of Davila require a finding that there is no other independent legal duty implicated by the defendant’s actions.¹³⁸ In Davila, the Court found no independent legal duty where potential liability under the state law claim “derives entirely from the particular rights and obligations established by the benefit plans.”¹³⁹ One factor the Davila Court found relevant was that the “interpretation of the terms of [the participant]s’ benefit plans forms an essential part of their [state law] claim.”¹⁴⁰ The interpretation of a plan would inevitably form an essential part of a state claim brought by a participant who seeks to compel a plan to follow an agent’s instructions.

That a duty to accept a power of attorney arises from an independent state law does not resolve the issue. According to the Sixth Circuit, “[w]hether a duty is ‘independent’ of an ERISA plan, for purposes of the Davila rule, does not depend merely on whether the duty nominally arises from a source other than the plan’s terms.”¹⁴¹ Rather, a “legal duty is ‘independent’ if it is not based on an obligation under an ERISA plan or if it ‘would exist whether or not an ERISA plan existed.’”¹⁴² Any duty of a plan to follow an agent’s directions on behalf of a participant will, unavoidably, be based on an obligation under the plan and depend on the existence of the plan.

V. Analysis of Preemption of State Power of Attorney Laws

It is doubtful a court would find state power of attorney laws to reference ERISA plans. Even though state power of attorney laws refer to employee benefit plans, their scope is not limited to ERISA plans. It seems clear then that state power of attorney laws do not “act [ ] immediately and exclusively upon ERISA plans” and that “the existence of ERISA plans” is not essential to the laws’ operations.¹⁴³ Thus, state power of attorney laws do not relate to an ERISA plan by referring to them. Whether they have an impermissible connection to ERISA plans is a more appropriate analysis.

To determine whether a state power of attorney law has an impermissible connection to ERISA plans, it is necessary to look to the objectives of ERISA and the nature of the effect of the state law on ERISA plans.¹⁴⁴ In Gobeille, the Court found Vermont’s attempt to supplement ERISA’s broad reporting and disclosure requirements to have an impermissible connection to ERISA health plans.¹⁴⁵ ERISA does not, however, contain a comprehensive scheme that governs plans’ duties to recognize participants’ representatives.

A state law also has an impermissible connection with an ERISA plan if it “‘governs . . . a central matter of plan administration’ or ‘interferes with nationally uniform plan administration.’”¹⁴⁶ A state power of attorney law can govern a central matter of plan administration and it might interfere with nationally uniform plan administration, but that alone is not dispositive.¹⁴⁷ Rather, state power of attorney laws could be viewed as one of the “‘myriad state laws’ of general applicability that impose some burdens on the administration of ERISA plans but nevertheless do not ‘relate to’ them within the meaning of [ERISA].”¹⁴⁸ It seems necessary, then, to dig deeper into the objectives of ERISA.

Even though ERISA does not generally address participants’ representatives, there are provisions in ERISA—found directly in the text or as interpreted by the Service, the Department, or case law—that clarify the objectives of ERISA in this regard. For some areas, the use of a state power of attorney law to compel a plan to accept the instructions of the participant’s agent may conflict with ERISA. Those areas include (1) the delegation of discretion to manage plan investments (participant-directed investments),¹⁴⁹ (2) spousal consent for the participant’s waiver of the survivor annuity,¹⁵⁰ and (3) the designation of a participant’s beneficiary.¹⁵¹ It is not always easy to distinguish where a statute’s impermissible connection due to its conflict with ERISA’s objectives ends and where ERISA’s conflict preemption begins. Wherever that line is drawn, the state power of attorney law would be preempted either because it has an impermissible connection with an ERISA plan or under conflict preemption.¹⁵² For other areas, ERISA requires plans to recognize the participant’s agent, whether or not state power of attorney laws are preempted. Those areas include (1) disclosure requests¹⁵³ and (2) benefits claims under the ERISA claims regulations.¹⁵⁴ However, for these latter two areas, ERISA complete preemption will limit the available remedies.

VI. ERISA Provisions That Affect the Exercise of a Power of Attorney

This Part considers the extent to which ERISA might affect the use of a power of attorney in the areas of disclosure requests, benefit claims, participant-directed investments, waiver of the survivor annuity, and beneficiary designations.¹⁵⁵ A recurring theme is that ERISA restricts the exercise of an authority under a power of attorney where the exercise conflicts with ERISA. To know whether a conflict exists, it is necessary to understands what ERISA says about the matter.

A. Disclosures

Upon receipt of a valid request, a plan administrator must furnish ERISA’s required disclosures whether or not state power of attorney laws are preempted. ERISA section 104(b)(4) requires a plan administrator, upon written request, to furnish a participant “a copy of the latest updated summary plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.”¹⁵⁶ Under ERISA section 105, the administrator must furnish participants a benefit statement upon request.¹⁵⁷ If the administrator fails to provide the required disclosures within thirty days after a written request, the participant may bring a civil action under ERISA section 502(a)(1)(A). A successful litigant, in the discretion of the court and pursuant to ERISA section 502(c)(1), may be awarded up to $110 per day from the date of the failure.¹⁵⁸

The Department of Labor regulations effectively require admin-istrators to recognize participants’ agents for these purposes: “For purposes of [ERISA section] 104(b)(4) . . . , materials furnished upon written request shall be mailed to an address provided by the requesting participant or beneficiary or personally delivered to the participant or beneficiary.”¹⁵⁹ Thus, certainly a participant can direct that the requested material be sent to his agent by giving the agent’s address for mailing the materials.

In Advisory Opinion 79-82A, the Department considered whether ERISA sections 104 and 105 require an administrator to furnish information to a third party at the request of a participant.¹⁶⁰ Under the facts of the opinion letter, a third party entity sent a request to the plan administrator asking for documents and a statement of the participant’s accrued benefits.¹⁶¹ The third party included a “Pension Information Authorization” signed by the participant.¹⁶² The administrator asked the Department whether it was required to furnish the disclosures to the third party under those circumstances. The Department said the regulations require “that if information is required to be furnished to a participant under sections 104(b)(4) and 105(a) of ERISA, the information must be furnished to a third party where . . . the participant has authorized in writing the release of the information to such third party.”¹⁶³

The Department revisited Advisory Opinion 79-82A in Advisory Opinion 82-21A. In this opinion, the trustees of a multiemployer plan asked the Department whether they must furnish disclosures upon the written request of contributing employers.¹⁶⁴ The employers requested, among other things, minutes of the trustees’ meetings.¹⁶⁵ The employers were not plan participants and did not include any participant authorizations with their disclosure request.¹⁶⁶ In addition to finding the trustees’ minutes did not fall within the scope of ERISA section 104(b)(4), the Department ruled the disclosure of the minutes would not be required under Advisory Opinion 79-82A because the disclosure had not been authorized by participants.¹⁶⁷ The Department said, “[a]bsent such authorization, it is the Department’s view that a plan is not required by section 104 of ERISA to provide such information to persons who are neither participants nor beneficiaries.”¹⁶⁸

The Department’s regulations and two advisory opinions establish a clear rule. If a participant signs an authorization that designates a third party as the participant’s representative authorized to receive disclosures, then the administrator must furnish the disclosures to the third party.¹⁶⁹ Nothing in the regulations requires that the authorization be in the form of a power of attorney.

The courts of appeals have held an administrator must furnish disclosures upon the written request of a participant’s attorney-at-law.¹⁷⁰ In Porcellini v. Strassheim Printing Co.,¹⁷¹ the court held a participant’s written request “through his counsel” was a proper written request under ERISA section 104.¹⁷² In Curry v. Contract Fabricators Inc. Profit Sharing Plan,¹⁷³ the court followed the lead of Porcellini and awarded penalties under section 502(c)(1).¹⁷⁴ In Moothart v. Bell,¹⁷⁵ the Tenth Circuit relied on Curry and did the same.¹⁷⁶ In Bartling v. Freuhauf Corp.,¹⁷⁷ the Sixth Circuit relied on Advisory Opinion 82-21A and held an administrator is not required to recognize an attorney-at-law for ERISA’s disclosure purposes, absent a written authorization from a participant.¹⁷⁸ In Daniels v. Thomas & Betts Corp.,¹⁷⁹ the Third Circuit declined to defer to Advisory Opinion 82-21A and rejected the Sixth Circuit’s Bartling opinion.¹⁸⁰ Instead, the Third Circuit held “that a representation by an attorney that he is making a request on behalf of a participant or beneficiary triggers the duty to respond under [ERISA section 104] when the administrator has no reason to question the attorney’s authority.”¹⁸¹

Although these court opinions concern attorneys-at-law, their analyses can provide insight into how the courts may view an administrator’s response to a disclosure request submitted with a power of attorney. In Minadeo v. ICI Paints,¹⁸² the plaintiff sued for wrongful termination based on alleged age discrimination and also brought ERISA claims, including a claim for penalties under ERISA section 502(c)(1).¹⁸³ After she was terminated, the plaintiff repeatedly requested plan information, which the administrator failed to provide for eleven months.¹⁸⁴ The plaintiff retained counsel who sent the administrator a written request.¹⁸⁵ The administrator failed to respond to the attorney’s request for four months.¹⁸⁶ The district court concluded Bartling controlled and denied the plaintiff’s penalty claim because the written disclosure request came from the attorney-at-law (presumably without the participant’s written authorization).¹⁸⁷ The Sixth Circuit reversed.¹⁸⁸

The Sixth Circuit distinguished Bartling based on the underlying factual circumstances. The court found the actions of the defendant in Bartling to be “forthright and non-evasive.”¹⁸⁹ In contrast, the Sixth Circuit found the way the administrator in Minadeo handled the disclosure request to be “entirely inappropriate.”¹⁹⁰ The court highlighted ERISA’s broad purpose to “ensure that the individual participant knows exactly where he stands with respect to the plan.”¹⁹¹ According to the court:

What Bartling says is that a plan administrator may require written authorization from a plan participant before satisfying a non-participant’s request for benefits information. Not inconsistent with that rule, we hold that a plan administrator is not entitled to ignore a request for pension benefits information made by an attorney on behalf of a participant, as [the employer] did in this case for almost four months.¹⁹²

The Minadeo panel further agreed with the Third Circuit’s reasoning in Daniels: “the objective of the ERISA disclosure requirements would be ill served . . . by permitting administrators to refuse to respond with no indication that authorization from the participant is even an issue.”¹⁹³

A lesson to be learned from Minadeo is administrators should be less concerned with the formality of the agent’s authorization and more concerned with the broad policy underlying ERISA’s disclosure requirements. Administrators should not simply ignore a disclosure request merely because they believe the authorization to act on the participant’s behalf is faulty. This same analysis could apply to a request from an agent acting under a power of attorney. Administrators who receive a disclosure request by an agent who purports to act under a power of attorney should not ignore the request. Rather, the administrator should engage in a meaningful dialogue with the agent or the participant to identify what the administrator requires. Under the regulations, even a power of attorney is not necessary to trigger this dialogue; any written authorization should do. Accordingly, if the power of attorney includes the appropriate authorization, the Department of Labor regulations require the administrator to honor the request, whether or not state power of attorney laws are preempted.

B. Benefit Claims

A plan must accept a valid designation of an authorized representative, whether or not state power of attorney laws are preempted. ERISA section 503 requires ERISA plans to decide claims pursuant to the Department’s regulations.¹⁹⁴ The regulations under section 503 (sometimes referred to as the “claims regulations”) generally require plans to establish minimum procedures for reviewing participants’ claims.¹⁹⁵ A plan’s claims procedures may not “preclude an authorized representative of a claimant from acting on behalf of such claimant in pursuing a benefit claim or appeal of an adverse benefit determination. Nevertheless, a plan may establish reasonable procedures for determining whether an individual has been authorized to act on behalf of a claimant . . . .”¹⁹⁶

In 1977, the Department’s regulations required plans to recognize a participant’s “duly authorized” representative.¹⁹⁷ In 1998, the Department issued proposed regulations that would have eliminated the requirement that the representative be “duly” authorized.¹⁹⁸ In response to public comments, the Department changed course:

The [proposed regulations] eliminated a provision in the 1977 regulation that seemed to imply that representatives of a claimant must be ‘duly authorized’ to act on behalf of the claimant. This change reflected the perception of the Department that no single Federal standard governs the authorization of a representative and that claimants should be able to freely name representatives to act on their behalf. Many commenters representing employers and plans responded that elimination of the concept of an ‘authorized’ representative could be read to require plans to accept anyone who claimed to be a representative of a claimant, without permitting plans to establish reasonable procedures to verify that status. This could prevent plans from protecting the privacy or other rights of claimants. The regulation responds to this concern by reinstituting a concept of authorization with respect to claimants’ representatives. Specifically, [the final regulation] provides that a plan’s claims procedures may not preclude an authorized representative (including a health care provider) from acting on behalf of a claimant and further provides that a plan may establish reasonable procedures for verifying that an individual has been authorized to act on behalf of a claimant.¹⁹⁹

The Department’s reluctance to impose a federal standard on the authorization of representatives should not be construed to undermine ERISA’s goal of uniformity in plan administration across state lines. Rather, the Department’s position allows sponsors to adopt their own standards. Once adopted, due to ERISA’s preemption of state law, those standards should apply across state lines, provided they are “reasonable procedures” under the claims regulations.²⁰⁰

The Department’s informal guidance provides insight into which procedures the Department may consider reasonable for this purpose:

B-1: May a plan require that a claimant complete and file a form identifying any person authorized to act on his or her behalf with respect to a claim?

The regulation provides that a reasonable claims procedure may not preclude an authorized representative of a claimant from acting on behalf of a claimant with respect to a benefit claim or appeal of an adverse benefit determination. The regulation also provides, however, that a plan may establish reasonable procedures for determining whether an individual has been authorized to act on behalf of the claimant. Completion of a form by the claimant identifying the authorized representative would be one method for making such a determination.²⁰¹

The claims regulations, combined with the Department’s sub-regulatory guidance, demonstrate the Department’s view that a plan may require participants to complete a form that applies specifically to that plan.²⁰² The clear implication is plans may impose a uniform procedure for identifying authorized representatives that is not dependent on state power of attorney laws. This scheme for recognizing participants’ representatives for purposes of ERISA’s claims regulations could be analogous to ERISA’s reporting and disclosure scheme, which the Gobeille Court found preempted Vermont’s health plan reporting statute.²⁰³ The Department’s claims regulations are not as extensive as ERISA’s reporting and disclosure requirements, at least with respect to identifying participant’s representatives, but this factor is mitigated by the narrow impact this aspect of the regulations has on plan operations. Thus, it appears plans may require claimants to complete the plan’s form, depending of course on the plan’s terms (though nothing prevents a plan from accepting a power of attorney). Nonetheless, just as with ERISA’s disclosure requirements, a plan fiduciary who receives a power of attorney should not simply ignore it merely because it does not meet the plan’s requirements for designating authorized representatives. Rather, the plan should engage in a meaningful dialogue with the agent, the principal, or both, and inform them of the plan’s requirements. Moreover, a court could easily hold that rejecting a power of attorney that designates a claim representative is an unreasonable procedure under the claims regulations, even where the power of attorney does not satisfy the plan’s form requirements.²⁰⁴

C. Participant-Directed Investments

Plans should not accept a power of attorney that attempts to delegate investment discretion to agents who are not authorized by ERISA to manage plan investments. State power of attorney laws that would require otherwise are preempted.

ERISA section 403(a) “states that ‘all assets of an employee benefit plan shall be held in trust by one or more trustees,’ and that those named trustees ‘shall have exclusive authority and discretion to manage and control the assets of the plan.’”²⁰⁵ This rule does not apply if the trustee is a directed trustee under ERISA section 403(a)(1) who is subject to the direction of a named fiduciary, or if investment authority is delegated to an investment manager pursuant to ERISA section 402(c)(3).²⁰⁶ Under ERISA section 405(c), named fiduciaries may allocate or delegate fiduciary authority, but its scope does not extend to the allocation or delegation of “trustee responsibilities.”²⁰⁷ The term “trustee responsibilities” generally means the discretion to manage plan investments.²⁰⁸ The effect of these provisions is, under ERISA, only named fiduciaries, trustees, and ERISA section 3(38) investments managers can have discretion to manage plan investments.²⁰⁹

In Jenkins v. Yager, the Seventh Circuit found ERISA contains an implied exception to this rule which permits discretion to be delegated to a fourth category.²¹⁰ In Jenkins, the Seventh Circuit held ERISA allows plans to delegate discretionary investment authority to participants, whether or not the plan satisfies the requirements of ERISA section 404(c).²¹¹ The question here is whether Jenkins can be extended to allow investment discretion to be delegated to the participant’s agent acting under a power of attorney.²¹²

The Jenkins court found the implied exception by reading ERISA and the regulations as a whole. The court focused particularly on ERISA section 404(c).²¹³ It observed that section 404(c) provides fiduciaries are not liable for plan losses that result from a participant’s exercise of control over the participant’s account.²¹⁴ The court emphasized a plan must satisfy a number of conditions for fiduciaries to be protected by ERISA section 404(c).²¹⁵ Not all plans satisfy those conditions. The court reasoned that just because a plan fails to satisfy all the conditions of ERISA section 404(c) does not mean the plan violates ERISA as a whole.²¹⁶

Implicit in the court’s analysis is a conclusion that a plan may delegate investment discretion to participants, even if the plan fails to satisfy ERISA section 404(c), without violating ERISA. There is nothing in ERISA section 404(c) or in Jenkins that suggests this analysis should be extended to participants’ agents acting under a power of attorney. Rather, it would be odd indeed if a participant (or even a trustee or a named fiduciary) could side-step the statutory restrictions on the delegation of investment discretion merely by signing a power of attorney. Based on the foregoing, it appears participants may not delegate investment discretion using a power of attorney to anyone other than a person who qualifies as an investment manager under ERISA section 3(38) (or a trustee or named fiduciary).

There can be little doubt that in practice participants often delegate discretionary authority over their participant-directed investments. For example, many plans permit participants to direct their investments using an internet portal with a user id and password. Some participants assuredly give their user id and password to others, such as their spouse, to manage their plan investments. Moreover, it seems certain many participants who use a plan’s brokerage window, self-directed brokerage arrangement, or similar arrangement allow their advisors who are not ERISA section 3(38) investment managers to manage investments in their plan accounts.²¹⁷ These occur, however, outside the knowledge of the plan’s named fiduciaries. When a fiduciary receives a power of attorney that attempts to delegate investment discretion to a person who is not an ERISA section 3(38) manger, the fiduciary should reject the delegation as conflicting with ERISA.²¹⁸

D. Waiver of the Survivor Annuity

Although the issue has not been decided by the courts, it would be risky for plans to allow an agent under a spouse’s power of attorney to consent to a participant’s waiver of a qualified joint and survivor annuity. Based on an analysis of the statute, state power of attorney laws are most likely preempted in this area.

ERISA retirement plans must offer benefits in the form of a qualified joint and survivor annuity or a qualified pre-retirement survivor annuity unless an exception applies.²¹⁹ Under one exception, the participant may elect to waive the survivor annuity, provided the participant’s spouse consents to the waiver.²²⁰ The spouse’s consent must be in writing, must acknowledge the effect of the participant’s election, and must be witnessed by a plan representative or a notary public.²²¹ The survivor annuity rules do not apply to individual account plans (such as 401(k) plans and profit sharing plans) that are not subject to the funding requirements of ERISA section 302 if (1) the plan provides the participant’s benefits are paid upon the participant’s death to the spouse or to a different beneficiary if the spouse consents (in a manner required for consent as described above), (2) the participant does not elect a life annuity, and (3) the plan is not a transferee of a plan that was subject to the qualified joint and survivor annuity rules.²²²

According to Treasury Regulations section 1.401(a)-20, Q&A-27, spousal consent is not required if it is established to the satisfaction of a plan representative that the consent cannot be obtained either because there is no spouse, or the spouse cannot be located,²²³ “or . . . such other circumstances as the Secretary of the Treasury (the Service) may by regulations prescribe.”²²⁴ The Service has provided only two exceptions by regulation. Under the first, if the spouse is incompetent to give consent, the spouse’s legal guardian may give the consent, even if the participant is the legal guardian.²²⁵ The second exception applies if the participant has been separated or legally abandoned, the participant has a court order to such effect, and there is no qualified domestic relations order that requires the spouse’s consent.²²⁶

“Where Congress explicitly enumerates certain exceptions to a general prohibition, additional exceptions are not to be implied, in the absence of evidence of a contrary legislative intent.”²²⁷ Here the distribution of benefits in a form other than a qualified joint and survivor annuity (or pre-retirement survivor annuity) is the general prohibition. Congress expressly enumerated the exceptions to that prohibition in ERISA section 205 and further authorized the Service to expand those exceptions. A power of attorney is not an exception found in the statute, the treasury regulations, or anywhere else. It appears then that a power of attorney may not be used to permit an agent, acting on a spouse’s behalf, to consent to a participant’s waiver of the survivor annuity (or to consent to the designation of a beneficiary other than the spouse in plans that require consent). Admittedly, this conclusion is based solely on a statutory analysis. There are no cases or regulatory guidance that directly address this question, and the Service, the Department, or a court could disagree and permit a power of attorney to be used for this purpose.

An argument could also be made that ERISA requires the spouse’s personal performance when consenting to the waiver. This can be implied by the requirement that the spouse’s consent be witnessed by a notary or a plan representative. If personal performance is required, or if the ERISA statute prohibits the delegation, then under the Restatement (Third) of Agency, the right to consent to the waiver of the survivor annuity would not be delegable.²²⁸

The power of attorney itself generally would not qualify as proper spousal consent. Both the participant’s and spouse’s consent must be obtained within 180 days prior to the participant’s benefit commencement date, after the participant has been furnished a written explanation of the survivor annuity.²²⁹ A spousal consent obtained without this explanation can be rendered invalid.²³⁰ Accordingly, unless the spouse were by chance to execute the power of attorney during this 180-day period, after the plan furnished the explanation of the survivor annuity, the spouse’s consent in the power of attorney would not be valid for purposes of ERISA section 205.

The Service issued Treasury Regulation section 1.401(a)-20, Q&A-27 before durable power of attorneys were widely accepted. The Service and the Department may wish to consider whether the regulation should be updated to reflect the current recognition of durable powers of attorney. Given that an agent owes a fiduciary duty to the principal, there is no reason to believe an agent would knowingly act against the interests of the spouse, absent fraud or similar circumstances. If the regulations are not updated and the federal courts are confronted with the issue, they might find that a waiver through a power of attorney is permissible. Until then, it seems risky for a plan to accept a spouse’s consent to a waiver of a survivor annuity effected by an agent acting under a power of attorney.²³¹

E. Beneficiary Designations

A reasonable position can be taken that state power of attorney laws are preempted if they would force a plan to permit an agent to modify a participant’s beneficiary designation. ERISA defines a beneficiary as “a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.”²³² An individual’s status as a beneficiary conveys to the individual, among other things, standing to bring a claim under ERISA,²³³ the right to request and receive disclosures from the plan administrator,²³⁴ and of course the right to receive benefits upon the death of the participant.²³⁵ The power of attorney issue can therefore be of critical importance.

“ERISA does not contain any provisions governing disputes between claimants to plan proceeds, or addressing whether an insured has effectively changed a beneficiary designation.”²³⁶ As made clear in Egelhoff, however, ERISA does govern the beneficiaries to whom payments should be made, for example, usually by specifying in the plan document how beneficiaries are determined.²³⁷ Moreover, spousal consent is specifically required by ERISA to designate a non-spouse beneficiary in most retirement plans.²³⁸

One court applied Egelhoff in the context of the use of a power of attorney to change a participant’s beneficiary. In the unpublished opinion of United Refining Co. Incentive Savings Plan for Hourly Employees v. Morrison (Morrison),²³⁹ the United States District Court for the Western District of Pennsylvania considered whether an agent’s use of a power of attorney properly designated himself as the beneficiary of the principal’s ERISA plan benefits.²⁴⁰ The case was brought by the plan and the plan administrator as an interpleader action.²⁴¹ The plan and plan administrator were dismissed early.²⁴² In resolving the dispute between the claimants, the court considered both state law and federal common law but ultimately decided that “Kennedy controls the resolution of this dispute.”²⁴³

In Morrison, the participant signed a power of attorney that named his neighbor as his agent.²⁴⁴ The power of attorney gave the neighbor the authority to manage the principal’s individual retirement account and to make gifts of the principal’s property.²⁴⁵ The participant also executed a will that named the same neighbor as the sole beneficiary of the participant’s estate.²⁴⁶ Less than a month before the participant died, the neighbor used the power of attorney to name himself as the beneficiary for the participant’s ERISA-covered retirement plan.²⁴⁷

The neighbor asserted that pursuant to Kennedy, the plan’s terms controlled the case.²⁴⁸ He argued the plan required payment to the beneficiary, and that he was the beneficiary based on the designation he had submitted using the power of attorney.²⁴⁹ The court agreed the plan’s terms controlled but disagreed the neighbor had followed the plan’s terms.²⁵⁰ The court found the plan’s terms only permit a participant to designate the beneficiary.²⁵¹ Because the neighbor, not the participant, had designated himself as the beneficiary, that did not occur.²⁵² The court said, “In order to honor [the neighbor]’s beneficiary designation, the Plan Administrator would be required to determine the meaning and validity of the POA, which is an exercise explicitly rejected by the court in Kennedy.”²⁵³ This is an interesting conclusion because it could be read to say that no power of attorney can be used to change a participant’s beneficiary in an ERISA plan, unless the plan’s terms authorize the use of a power of attorney for this purpose.²⁵⁴ Although the court found Kennedy controlling, it said it would have reached the same conclusion under both state law and federal common law.²⁵⁵

Morrison does not imply plans can avoid every state law merely with plan drafting. A multiemployer plan cannot avoid local building codes or state wage payment and collection laws merely by including a clause in the plan document. Only laws that are preempted by ERISA can be avoided by plan drafting.²⁵⁶ This brings us back to the question of whether ERISA preempts state power of attorney laws for the purposes of beneficiary designations. If they impermissibly interfere with the plan’s nationally uniform administration, they would be preempted.

The courts have construed the functions that fall within a plan’s protected administrative practices broadly. In Gobeille, the Court found that “reporting, disclosure, and recordkeeping are central to, and an essential part of, the uniform system of plan administration contemplated by ERISA.”²⁵⁷ Another court noted that “[o]bligations undertaken with plan administration include ‘determining the eligibility of claimants, calculating benefit levels, making disbursements, monitoring the availability of funds for benefit payments, and keeping appropriate records in order to comply with applicable reporting requirements.’”²⁵⁸ These cases show that the nationally uniform administrative practices that ERISA protects are not limited to how much gets paid. ERISA also protects a plan’s operations—including how benefits get paid and how participants’ requests are processed. In Egelhoff, we see ERISA also protects to whom benefits get paid.²⁵⁹ Given this broad view of what constitutes plan administration, it appears a court could very well conclude that requiring a plan to recognize a beneficiary designation made by an agent acting under a power of attorney would in fact interfere with the plan’s administration. This conclusion would mean the state power of attorney law relates to a plan, at least for purposes of beneficiary designations, and is therefore preempted.

A court could also find a state power of attorney law conflicts with the text of the ERISA statute. As noted above, the statute defines a beneficiary as a person designated by a participant or by the terms of an employee benefit plan, who is or may become entitled to a benefit under the plan.²⁶⁰ If the terms of the plan prohibit the use of a power of attorney, then a person selected by an agent acting under a power of attorney would not be designated by the terms of the plan. Moreover, the requirement that a beneficiary must be someone “who is or may become entitled to a benefit” under the plan suggests the plan’s terms dictate how a beneficiary is designated.²⁶¹ This is consistent with the court’s holding in Morrison. Finally, even if the definition of beneficiary in ERISA section 3(8) could be expanded by interpretation to include someone designated by a participant or his agent, it seems unlikely a court would transform this (expanded) definition into a mandate that compels plan administrators to accept a power of attorney. Based on the foregoing, a reasonable position can be taken that a sponsor may design a plan document to prohibit the use of a power of attorney to designate, modify, or revoke a participant’s beneficiary. A state power of attorney law that would compel a fiduciary to violate the plan’s terms in this regard would, pursuant to Egelhoff, be preempted.

In Clouse v. Philadelphia, Bethlehem & New England Railroad Co.,²⁶² the court considered whether the exercise of a general power of attorney by the employee’s attorney-in-fact was effective to change the employee’s beneficiary designation.²⁶³ To interpret the power of attorney, the court looked not to state law but instead relied on federal common law.²⁶⁴ The court held the Restatement (Second) Agency section 37 should apply when interpreting the scope of a power of attorney in the context of ERISA plan administration.²⁶⁵ Under the Restatement (Second) Agency section 37, a power of attorney that provides an agent a general power to do everything the principal could do is nonetheless limited in its scope if the power of attorney also lists specific acts the agent may do.²⁶⁶ For example, a general power of attorney that provides the agent can do anything the principal can do, but also lists specific acts such as making gifts and transferring the principal’s real property, might not authorize the agent to engage in retirement plan transactions if they were not specifically authorized in the power of attorney.²⁶⁷

Although the trend in the courts is to apply a federal common law to construe a power of attorney for use with an ERISA plan, there are still cases that apply state law. In In re Shafer,²⁶⁸ the United States District Court for the Southern District of Indiana considered whether a change of beneficiary purported to be made pursuant to a power of attorney was valid.²⁶⁹ One issue was whether the participant was competent when he executed the power of attorney.²⁷⁰ The court said Indiana law governed this issue because the “execution took place outside of the ERISA context.”²⁷¹

However, many powers of attorney are executed outside the ERISA context. Why should one aspect of a power of attorney be governed by state law and another governed by federal common law, if both powers of attorney were “executed outside of the ERISA context”?²⁷² One potential difference seems to be the competency of an individual signing a power of attorney, which is wholly external to the administration of a plan, is “too tenuous, remote, or peripheral”²⁷³ to implicate ERISA. It is in this sense that the In re Shafer court probably meant the competency of the principal in executing the power of attorney was “outside of the ERISA context.”²⁷⁴ In contrast, the scope of an agent’s authority under a power of attorney to act on behalf of a participant would bear directly on a plan’s admin-istration.

However, in Hocknell v. Metropolitan Life Insurance Co.,²⁷⁵ the court analyzed the state power of attorney law as it applied to the payment of ERISA benefits. In that case, the plaintiff held a durable power of attorney for her uncle, who was a participant in his employer’s group life insurance plan.²⁷⁶ Pursuant to the general provisions of that authority, the plaintiff sent the plan a beneficiary designation that named herself as the beneficiary of her uncle’s benefits.²⁷⁷ A little more than four months later, her uncle died.²⁷⁸ Both the plan and the court rejected the plaintiff’s claim based on New Jersey law.²⁷⁹ Interestingly, neither party raised the issue of ERISA preemption of the New Jersey statute.²⁸⁰ Moreover, neither party addressed whether the New Jersey statute should be incorporated into federal common law.²⁸¹ Rather, the plan argued that the plaintiff did not provide explicit power to make gifts of the principal’s property (including ERISA benefits), as was required under the state law.²⁸²

VII. Analysis of Potential Effect of ERISA Complete Preemption

Even if state power of attorney laws are not preempted, a claim brought to dispute a plan’s refusal to follow an agent’s instructions would probably be completely preempted by ERISA. A problem a plaintiff will face is, under a power of attorney, a principal cannot delegate authority the principal lacks. A participant whose claim is completely preempted when dealing directly with a plan is not going to avoid complete preemption by signing a power of attorney and having an agent deal with the plan. A plan that rejects a power of attorney by refusing to follow an agent’s instructions is effectively denying the participant’s claim (or request). That claim may be in the form of a request for disclosures, a request for benefits, a request to enforce the participant’s rights under the plan, or a similar request. Any lawsuit brought to compel the plan to honor the agent’s request will be completely preempted to the same extent the participant’s lawsuit regarding the same request would be completely preempted.

In almost all cases, a participant who brings a state law claim to compel a plan to follow the instructions of an agent acting under a power of attorney could bring the underlying dispute under ERISA section 502(a).²⁸³ For example, if a plan rejects a power of attorney and denies the participant a benefits payment, the lawsuit would fall under ERISA section 502(a)(1)(B).²⁸⁴ If the plan refuses to accept a new beneficiary designation or a waiver of a survivor annuity, the participant could file under section 502(a)(1)(B) or section 502(a)(3).²⁸⁵ If the participant seeks disclosures, the participant could claim penalties under ERISA sections 502(a)(1)(A) and 502(c).²⁸⁶ Thus, in most, if not all, cases the participant will meet the first prong of Davila,²⁸⁷ though of course each case would have to be considered on its own facts. This analysis can be further illustrated by other examples.

Assume a participant properly executes a power of attorney that expressly allows the agent to change the participant’s beneficiary, including allowing the agent to select himself as the beneficiary. The agent presents the power to the plan along with a new beneficiary designation form that names the agent as the participant’s beneficiary. Assume state law allows the agent to designate himself as the principal’s beneficiary. Could, or should, the plan fiduciary reject the new beneficiary designation if it believes accepting the designation would be a breach of ERISA’s fiduciary duties to the participant, or would the fiduciary be compelled to follow state law and accept the power of attorney?

This hypothetical is similar to the facts the court faced in Clouse v. Philadelphia, Bethlehem & New England Railroad Co.²⁸⁸ The agent attempted to change his father’s beneficiary designation using a general, durable power of attorney while his father was unconscious.²⁸⁹ The power of attorney included language that gave the agent the power to do anything his father could do, but also included language providing the agent with specific powers.²⁹⁰ However, the power of attorney did not provide the agent with the specific authority to change the agent’s beneficiary designation under his employee benefit plan.²⁹¹ Less than two months earlier, the father told the plan representatives who he wanted as his beneficiaries and submitted his own beneficiary designation to the plan sponsor’s staff.²⁹² The court found the scope of the power of attorney did not give the agent the right to select a new beneficiary, specifically referencing Restatement of Agency section 37, which limits a power of attorney’s general language when it also includes language noting specific powers.²⁹³ The court concluded that for a power of attorney to effectively provide an agent with the power to change a beneficiary designation, the power of attorney should specifically mention the authority to change beneficiary designations under an employee benefit plan and the employee benefit plan should specifically recognize in the plan the possibility of a power of attorney that includes such a specific power.²⁹⁴

However, what if the power of attorney had given the agent this right, but it conflicted with a provision in the plan document? A fiduciary cannot follow a provision in a plan document when doing so would be a breach of ERISA’s fiduciary duties.²⁹⁵ Thus, even if the plan’s terms permit a beneficiary designation to be modified by use of a power of attorney, ERISA would require the fiduciary to reject the new beneficiary designation if the fiduciary believes acceptance would be a breach of fiduciary duties.²⁹⁶ Otherwise, if state law could be used to compel a fiduciary to accept the new beneficiary designation, the formalities of state law which govern the execution of a power of attorney would displace ERISA’s fiduciary duties. It seems unlikely a court would accept this result.

Consider a different example, where the use of a power of attorney does not conflict with ERISA. Assume a participant’s agent acts under a power of attorney and requests disclosures on behalf of the participant. Assume further the power of attorney contains the written authorization required by Advisory Opinions 79-82A and 82-21A.²⁹⁷ If the administrator rejects the power of attorney and wrongfully fails to provide the disclosures, the participant’s remedies would not be state-law civil monetary penalties for wrongful rejection of a power of attorney. A state-law claim for an injunction to compel a plan to accept the power of attorney would likely be converted into a claim for an injunction under ERISA section 502(a)(3) because the claim could originally be brought under section 502(a)(3).²⁹⁸ The plan’s obligation to accept the power of attorney would not be an independent legal duty because it would be inextricably intertwined with the plan’s obligations to furnish disclosures. A claim for civil penalties under ERISA section 502(c)(1) could also be brought.²⁹⁹ Any remedy sought under state law would be completely preempted because it would “duplicate[ ], supplement[ ], or supplant[ ]” the monetary penalties provided by ERISA section 502(c).³⁰⁰ A participant who obtains the injunction and compels the disclosures could, in the discretion of the court, be awarded attorneys’ fees under ERISA section 502(g),³⁰¹ and thus any state-law remedy for attorneys’ fees would be preempted.

Based on the foregoing, it would appear that almost any state law claim brought to compel an ERISA plan to follow the instruction of an agent acting under a power of attorney would be completely preempted by ERISA. As previously noted, however, each claim would be considered on its own merits, taking into account the underlying facts and circumstances. There may be situations where a court could find a claim brought under a state power of attorney law survives complete preemption, but such circumstances do not quickly come to mind.

VIII. What Policies Should Plans Adopt for Accepting Powers of Attorney?

A. Which Law Controls: ERISA, the Plan, Federal Common Law, or State Law?

The ERISA statute is not the only source of law that governs ERISA plans. The Supreme Court has “held that courts are to develop a ‘federal common law of rights and obligations under ERISA-regulated plans.’”³⁰² The courts’ ability to develop federal law is not unlimited:

[T]hat Congress intended for the federal courts to create a body of federal common law to govern ERISA cases does not . . . give a federal court carte blanche authority to apply any prevailing state common law doctrine it chooses to ERISA cases. A federal court may create federal common law based on a federal statute’s preemption of an area only where the federal statute does not expressly address the issue before the court. Furthermore, even when it is appropriate for a federal court to create federal common law, it may use state common law as the basis of the federal common law only if the state law is consistent with the policies underlying the federal statute in question; federal courts may not use state common law to re-write a federal statute.³⁰³

Courts apply federal common law only “to instances in which ERISA is ‘silent or ambiguous,’ where there is an ‘awkward gap in the statutory scheme,’ or where it may ‘be said that federal common law is essential to the promotion of fundamental ERISA policies.’”³⁰⁴ Moreover, “the scope of permissible judicial innovation” to develop a federal common law under ERISA “is narrower in areas whether other federal actors are engaged.”³⁰⁵ For example, in Black & Decker Disability Plan v. Nord³⁰⁶ the Court considered whether ERISA plans must follow the physician treating rule.³⁰⁷ The Court declined to adopt the rule as a matter of federal common law because, among other reasons, the Department of Labor (Department) had chosen not to adopt the same rule.³⁰⁸

The Court has also held that the federal common law does not supersede the valid terms of a plan document. Rather, ERISA requires plan fiduciaries to manage ERISA plans “in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of . . . [ERISA].”³⁰⁹ On this basis the Court found in Kennedy that the plan controls if federal common law conflicts with the valid terms of the plan (at least with respect to beneficiary designations).³¹⁰

The foregoing reveals a hierarchy of the predominance of each source of law. Where ERISA supplies the answer (that is, where ERISA is not silent or ambiguous and there is no gap in the statute), ERISA applies. If ERISA is silent or ambiguous, pursuant to Kennedy we look to the plan document, but only insofar as it is consistent with ERISA.³¹¹ If neither ERISA nor the plan document provides an answer, the courts may look to, or develop, a federal common law to provide the answer. Even if state law is preempted, the courts may incorporate analogous state law into the federal common law of ERISA, provided the state law is consistent with ERISA. Finally, state law governs to the extent it is not preempted.

This hierarchy itself illustrates two points. First, in some areas, sponsors may not deny participants’ agents’ access to deal with the plan on behalf of a participant—not even with careful drafting of the plan document—because ERISA itself requires otherwise. Those areas are (1) disclosures and (2) benefit claims. Because ERISA supplies the answer in these areas, it controls. The second point is, for those areas for which plans have flexibility, pursuant to Kennedy, sponsors may incorporate a policy into their plan documents.³¹² Incorporating a policy into the plan document can help sponsors ensure uniform nationwide administration and avoid potentially inconsistent federal common law.

B. Should Plans Adopt a Power of Attorney Policy?

Although ERISA does not require plans to adopt a power of attorney policy, it is recommended they do. ERISA’s fiduciary obligations doubtlessly impose a duty on plan fiduciaries to provide incompetent or incapacitated participants some mechanism to grant others the authority to pursue the participant’s rights under the plan.³¹³ The question is whether that mechanism should include powers of attorney.

The obligations of a fiduciary to provide incompetent or incapacitated participants the opportunity to designate a representative does not mean plans must accept a power of attorney. Plans may adopt other methods. For example, plans could require the appointment of a legal guardian. However, this can be expensive and time consuming. Plans could make appointing a representative much easier than executing a power of attorney, such as by providing participants a simple form they can sign to identify their representative. This informal approach could, however, cause participants not to consider the importance of appointing someone else as their representative for matters involving their benefits. One advantage of a plan accepting a power of attorney that is valid under state law is the formalities of execution required by the states both provide inherent protections for participants and naturally tend to cause participants to take the matter more seriously.

This need to have a power of attorney policy is not purely conjectural. Plans have been injured financially after wrongfully honoring a power of attorney. In Taylor v. Kemper Financial Services Co.,³¹⁴ the plan fiduciary changed the principal’s beneficiary contrary to the scope of the power of attorney.³¹⁵ The court found the fiduciary liable for a breach of fiduciary duties.³¹⁶ In Flinn v. Minnesota Life Insurance Co.,³¹⁷ a life insurance plan accepted a forged power of attorney and paid death benefits to the agent under that power of attorney, even though the actual, designated beneficiary was not under any incapacity.³¹⁸ Although following a power of attorney policy may not have changed the outcome in this case,³¹⁹ there are still good reasons for plans to adopt a policy.

Sponsors might decide not to adopt a power of attorney policy if they believe the administrative burdens that come with documenting adherence to a policy outweigh the potential advantages that come with adopting the policy. Although this may seem practical from a business perspective, when weighing these costs and benefits, plan sponsors should take into account the gravity of dealing with a participant’s agent.

Even a person who is a duly authorized agent of a participant under a proper power of attorney is nonetheless a stranger to the plan. A plan fiduciary owes a fiduciary duty to the participant.³²⁰ Although agents may have authority to act on behalf of participants, principals and agents are still distinct legal entities.³²¹ A plan should have the same or similar concerns as financial institutions face when presented with a power of attorney.³²² As Daniel Wentworth stated,

An attorney-in-fact who comes forward to the financial institution presenting a power of attorney document is someone who is not the account owner, is entirely foreign to the account (and perhaps even foreign to the financial institution), yet professes to have the authority to access and control the owner’s entire account. Given this perspective, account owners might find it entirely appropriate—and somewhat reassuring—for the initial reaction of their financial institution when approached by an attorney in-fact to be one of hesitation and scrutiny. After all, in the usual case, the account owner places his or her assets with the institution with the implicit understanding that only the account owner will be able to access the account. Verifying the authority of the attorney-in-fact to act for the account owner, therefore, is the first priority of every financial institution . . . .³²³

As with customers of financial institutions, plan participants have an expectation that only they will have access to their plan account. This expectation may be justified because the plan’s fiduciaries have a duty to act solely in the interest of plan participants and their beneficiaries and to carry out their duties prudently.³²⁴ These fiduciary duties may require the plan’s fiduciaries to safeguard participants’ accounts from unauthorized access.³²⁵ Thus, verifying the authority of the purported agent to act for the participant should be a high priority of any plan fiduciary. A person who purports to be an attorney-in-fact but who is not the participant’s duly authorized agent could damage a participant’s interest in the plan—the protection of which is an essential reason Congress enacted ERISA³²⁶—as much as anyone, including the plan’s trustee and plan administrator. Plans, particularly large plans, should adopt power of attorney policies for the same reasons large financial institutions adopt them: they help protect both the financial institution’s customers and the financial institution itself.

Some sponsors may already have informal power of attorney policies but have not adopted a formal written policy. Smaller organizations typically will not have formal written policies. As they grow, org-anizations should consider adopting a written power of attorney policy, much the same way growing organizations tend to formalize policies in other areas. Written policies provide employees with guidance on best practices. They help employees carry out functions consistently and in a manner that is commonly accepted in the organization, rather than on an ad-hoc basis. Written policies can be used to train junior personnel and be used by staff for making routine decisions without the need to seek advice from senior personnel. Finally, documenting adherence to a formal, written policy creates a paper trail that memorializes a prudent fiduciary process—something that can be important in litigation.

C. What Should a Plan’s Power of Attorney Policy Address?

When establishing and administering a power of attorney policy, sponsors should at a minimum consider the following: (1) what powers of attorneys the plan will accept, (2) what inquiry should a plan undertake upon receiving a power of attorney, and (3) what limits should a plan place on the use of powers of attorney. The power of attorney policy should address each area for which the plan will allow an agent under a power of attorney to act on behalf of a participant and each area for which a power of attorney will not be accepted. The power of attorney policy should be incorporated into the plan document, so the plan can argue for reliance on Kennedy.

1. What Powers of Attorney Should a Plan Accept?

Plans should certainly accept valid powers of attorneys submitted on behalf of participants who are unable to handle their own affairs. This would cover circumstances where the principal is incapacitated, including being absent for an extended period (such as a reservist called to active duty).³²⁷ Fiduciaries cannot sit on their hands and allow a participant’s benefits to waste away merely because the participant lacks the ability to pursue a claim or submit a request to the plan. This duty is not only expressed in the claims’ regulations, but it is also inherent in ERISA’s fiduciary duties.³²⁸

As for other participants, there is a certain wisdom to a plan accepting a power of attorney unless there are good reasons to reject it. Those reasons, however, may not be difficult to find. Accepting a power of attorney for participants who are capable of handling their own affairs may unnecessarily impose additional administrative burdens on the plan or the plan sponsor.³²⁹ It can impose additional costs, and fiduciaries have a duty to defray the reasonable expenses of the plan.³³⁰ It increases the chance for miscommunications and errors. It adds to the plan’s already considerable recordkeeping requirements. Sponsors may nonetheless want to allow competent participants to use a power of attorney for the convenience of the participants.

Many banks ask their customers to use the bank’s form of a power of attorney. This makes it easier for banks to verify the power is valid and to interpret the scope of the authority granted to the agent. Plans may wish to use their own forms for the same reasons.

Plans should not provide their own power of attorney form unless it complies with appropriate state law. State law formalities of execution are designed to protect the principals. In addition, even though state law may be preempted vis-à-vis the plan, the participant’s agent will nonetheless be subject to applicable state law duties and obligations, as well as potential state law liability. The use of a form that does not comply with state law could cast a cloud over the agent’s duties and potential liability under state law.

2. What Inquiry Should a Plan Undertake Upon Receiving a Power of Attorney?

The case law is clear that a plan fiduciary who “deals with an agent does so at his peril and must make a reasonable inquiry into the scope of the agent’s authority.”³³¹ The necessary level of inquiry for any given circumstance would be governed by ERISA’s fiduciary standards, including the duty of prudence.³³² A transaction that is more material would warrant a more significant investigation. For example, less inquiry would be needed for an agent who presents a power of attorney to correct a participant’s misspelled address. In contrast, a more significant inquiry would be prudent where an agent, purporting to represent a beneficiary, presents a power of attorney shortly after the participant’s death and requests benefits be paid to the agent on the beneficiary’s behalf.

Plans should consider incorporating the following into their power of attorney policies:

1. Was the principal competent when the power of attorney was executed?
2. Does the power of attorney comply with applicable state law, including state law execution requirements?
3. Has the power of attorney expired or terminated, or has the principal died, or both?
4. Did the agent present the plan with an original of the power of attorney?
5. Should the plan request the agent to certify the power of attorney remains in effect at the time the power is presented to the plan or any other factual matter?³³³
6. If the power is a springing power of attorney, has the springing event occurred? For example, has the principal become incapacitated?
7. Has the plan received satisfactory evidence of the principal’s incapacity or incapacity, which may include written document from the principal’s physician?
8. Has the agent presented proper identification?
9. Does the scope of the power of attorney include the authority the agent seeks to exercise on behalf of the participant?
10. Is the authority the agent wishes to exercise permitted by ERISA and the plan’s terms, or would it conflict with ERISA or the plan’s terms?
11. Are there any circumstances that might cause a reasonable person to undertake a more thorough investigation? For example, was the power of attorney executed near the date of the participant’s death? Are there signs the participant is being exploited or is vulnerable to financial exploitation?
12. Who (what plan fiduciary) has the discretion to determine whether the power of attorney meets the plan’s requirements?
13. Should the plan participant or a designated “trusted contact” be notified if the power of attorney has been exercised?

If the plan discovers a crime or abuse has been committed with a power of attorney, it should report the matter to local authorities.

In implementing any power of attorney policy, as with almost all matters of plan administration, the plan’s fiduciaries should ensure that the process is documented and the reasons for any decisions, particularly any discretionary decisions, are properly memorialized. Plan fiduciaries may from time to time wish to audit the plan’s operations with respect to powers of attorneys to ensure the plan’s procedures are being followed.

3. What Limits Should a Plan Place on the Use of Powers of Attorney?

As discussed in Part VI, plans cannot require a power of attorney be used to request disclosures on behalf of a participant. In the absence of guidance from the Internal Revenue Service, the Department of Labor, or the courts, a plan should not allow a power of attorney to be used to waive the qualified joint and survivor annuity or the qualified pre-retirement survivor annuity on behalf of a spouse. Participant-directed investments and beneficiary designations are discussed separately below.

a. Participant-Directed Investments

Part VI also explains that plans generally cannot allow a participant to delegate investment discretion pursuant to a power of attorney. Investment discretion over plan assets must be held by a trustee investment manager under ERISA section 3(38) or the participants.³³⁴ If the plan terms permit, incompetent or incapacitated participants may use a power of attorney to delegate investment discretion to a person who qualifies as an investment manager under ERISA section 3(38).³³⁵ The plan may also permit the participant’s account to be invested in a qualified default investment alternative in the absence of an affirmative election by the participant.³³⁶ In such circumstances, the investment in the qualified default investment alternative is deemed to have been made by the participant.

b. Beneficiary Designations

In the author’s view, plans should generally not allow a power of attorney to be used to designate a beneficiary or modify or revoke a previous beneficiary designation. If a principal is competent, the principal herself can change the beneficiary. If the principal is incapacitated, one wonders how the principal’s agent knows what the principal wants. If the principal is present and competent but physically incapacitated, the principal can write the same “x” on the plan’s beneficiary designation form—preferably in front of a plan official—that she can write on a power of attorney. If the principal dies, the power of attorney expires.³³⁷ The concern people usually want to address is the principal may become incapacitated after changing her mind and before she can submit a new beneficiary designation to the plan, but not before she notifies her agent she changed his mind. This risk seems too narrow to overcome the potential problems that arise when agents are permitted to use a power of attorney to change the participant’s beneficiary. Some sponsors may wish to allow participants to give their agents a power of appointment over their beneficiary designations, in which case they could permit the use of a power of attorney to change the beneficiary. Something sponsors might consider is allowing agents to use a power of attorney to select the incapacitated participant’s beneficiary(ies) when the participant has no beneficiary designation on file, and the agent believes the plan’s default beneficiary designations are not in the best interest of the participant. Sponsors may also allow a power of attorney to be used to select or change a participant’s beneficiary but only to a limited class of beneficiaries, such as the participant’s family members or the participant’s estate or in circumstances where the designation made by the participant is ineffective or clearly disadvantageous.³³⁸

IX. Conclusions

Whether a state power of attorney law sufficiently relates to a plan to be preempted by ERISA is uncertain. In one sense, they may be considered among the myriad state laws of general applicability that impose some burdens on the administration of ERISA plans but, nevertheless, do not “relate to” them within the meaning of ERISA. In another sense, when presented to a plan, a power of attorney can be viewed as going to the heart of the plan’s administration, as the agent stands in as a proxy for the participant who seeks to enforce the participant’s rights under the plan.

Even if state power of attorney laws are not per se preempted, the use of a power of attorney in specific circumstances may conflict with ERISA. If so, ERISA controls. This Article concludes a participant’s use of a power of attorney to delegate investment discretion to someone who is not an investment manager under ERISA section 3(38) (or a named fiduciary or trustee) would impermissibly conflict with ERISA. Any state power of attorney of law that would compel a plan to recognize such a delegation of authority is therefore preempted. Under a statutory analysis, a reasonable conclusion can be reached that the use of a power of attorney by an agent, acting on a spouse’s behalf, to consent to a waiver of a survivor annuity also conflicts with ERISA. This is an area where the Service and the Department may wish to update existing guidance to reflect the modern trend of recognizing durable powers of attorney. Finally, a reasonable position can be taken that plan sponsors may design a plan document to prohibit the use of a power of attorney to designate, modify, or revoke a participant’s beneficiary.

For some areas of plan operations, participants do not need to use a power of attorney. A plan administrator who receives a request for disclosures from a participant’s representative, purporting to act on the participant’s behalf, should not ignore the request merely because the authorization is based on a power of attorney. Similarly, ERISA’s claims regulations do not require a power of attorney be used for a participant to designate a representative to pursue a claim on the participant’s behalf.

Almost any state-law claim that an agent (or the principal) might bring against a plan that concerns the use of a power of attorney would be completely preempted by ERISA. Any state-law remedy would supplant or duplicate the remedies available under ERISA, and therefore, would be preempted. The state cause of action would also be completely preempted because the participant will generally be able to bring the cause action of under ERISA section 502(a), and a plan’s obligation to follow an agent’s instructions would inevitably involve an interpretation of the plan or be based on an obligation under the plan. Each case, however, would be decided based on the underlying facts and circumstances.

The preemption of state power of attorney laws does not mean plans may allow the benefits of an incompetent or incapacitated participant to waste away. Rather, ERISA’s fiduciary standards create an obligation for plan administrators to provide a mechanism to permit participants to enforce their rights through a representative who acts on their behalf. Plans may do so by requiring the appointment of a legal guardian, by accepting a power of attorney that is valid under state law, or through a less formal method that allows participants to designate a representative using a simple form.

Plans, particularly large plans, should consider adopting and following power of attorney policies. Those policies should be designed to protect both the plan as a whole and each participant individually. The administration of powers of attorney should be properly documented and monitored by appropriate plan fiduciaries. For the same reasons large financial institutions adopt power of attorney policies, plans should too. The policies can help protect both the plan and the plan’s participants, both of which are important policy considerations that underlie ERISA.

In Memoriam of Kevin Allen Wiggins

By Tara Silver-Malyska

On Tuesday, June 11, 2019, at age 54, Kevin Allen Wiggins of Mars, Pennsylvania passed away. Kevin was the husband of Beth Reaves Wiggins, father of Mitchell Wiggins and son of the late Betty Wiggins. A graduate of Cornell Law School, and University of North Florida, Kevin was an ERISA Attorney in private practice in Pennsylvania. He was appointed to the ERISA Advisory Council by the United States Secretary of Labor. He belonged to many legal organizations in the Pittsburgh area. He proudly served five years in the U.S. Navy as an Arab linguist. Kevin was an active member of Grace Community Church in Cranberry Twp. Of all his accomplishments, more than anything else he was extremely proud of his son, Mitchell. He was deeply loved by his family and will be greatly missed. Donations in his memory may be made to Justice for Children at http://justiceforchildren.org.

Kevin had over twenty years of experience as a compensation and benefits attorney. He was a trained mediator and a member of the collaborative law association of southwestern Pennsylvania. Kevin also was a first chair litigator in state and federal courts, including before the United States Court of Appeals for the Fifth Circuit. He was also an expert witness in executive compensation litigation.

We remember Kevin for his joyful nature, his curiosity and wit, his love of learning and for his tackling tough legal subject matters and challenges. We first came to know Kevin when he started to practice in the employee benefits area in Dallas, Texas then followed his successful career path to West Virginia and finally to private practice in Pennsylvania.

Kevin most recently served as the Vice-Chair for the Welfare Plans Committee of the American Bar Association, Real Property Trusts & Estates (RPTE) Section. One of Kevin’s most memorable contributions to RPTE was his presentation and white paper on Transgender Issues Across Trans-Legal Disciplines as presented at the 2017 RPTE Spring Symposia, in Denver Colorado.

Kevin was truly a great friend, colleague and contributor to the legal profession and employee benefits, and will be greatly missed by all.

Endnotes

1. See Ancient History Sourcebook: A Collection of Contracts from Mesopotamia, c. 2300-428 BCE, http://sourcebooks.fordham.edu/ancient/mesopotamia-contracts.asp; see also Catherine Seal, Power of Attorney: Convenient Contract or Dangerous Document?, 11 Marq. Elder’s Advisor 2 (2010).

2. 29 U.S.C. § 1001, et. seq. All state statutory citations in this Article refer to the current statute unless otherwise indicated. The same applies to state regulations and ordinances.

3. Other articles that consider similar issues include Albert Feuer, When May an Agent Act on Behalf of an ERISA Plan Participant or Beneficiary, 41 J. Pension Plan & Compliance 1 (2015); Albert Feuer, How Should ERISA Plans Handle Powers of Attorney and Court-Appointed Guardians and the Absence of Such Agents for Participants Lacking Capacity?, 54 Tax Mgmt. Memo. 351 (2013).

4. For purposes of ERISA, an employee benefit plan is either a retirement plan (a plan that provides retirement income to employees or defers the receipt of income to employees until termination of employment and beyond) or a welfare benefit plan, which encompasses employer-sponsored group health, life, disability, and severance plan plans. See 29 C.F.R. § 2510.3-3(b), (c). A plan is covered by Title I of ERISA only if it covers any common law employees. See Schwartz v. Indep. Blue Cross, 299 F. Supp. 2d 441, 446 (E.D. Pa. 2003). The sole owner of a business and his or her spouse and partners in a partnership and their spouses are not considered employees for this purpose. See 29 C.F.R. § 2510.3-3(b), (c). Individual retirement accounts (IRAs) that do not include employer contributions and that are not sponsored or promoted by an employer are not covered by Title I of ERISA. See 29 C.F.R. § 2510.3-2(d). Certain church and governmental plans are also generally exempt from ERISA. See CFR § 2520.101-2(c)(2)(i)(C)-(D). In this Article, “plan” will refer to an employee benefit plan that is covered by Title I of ERISA. A “participant” usually refers to an employee, former employee, or dependent covered by the plan, and “beneficiary” typically refers to the person designated to received benefits from the plan in the event of the participant’s death. See ERISA § 3(7)-(8), 29 U.S.C. § 1002(7)-(8). For simplicity, unless the context suggests otherwise, the use of the term participant in this Article will refer to both a participant and a beneficiary.

5. See id. §§ 1001–1191(c).

6. See Washington Nat. Ins. Co. v. Hendricks, 855 F. Supp 1542, 1549 (W.D. Wis. 1994).

7. This Article does not discuss the nuanced distinctions between a principal’s incapacity and incompetence. The term “incapacity” (or incapacitated) is defined in section 102(5) of the Uniform Power of Attorney Act as the “inability of an individual to manage property or business affairs because the individual: (A) has an impairment in the ability to receive and evaluate information or make or communicate decisions even with the use of technological assistance; or (B) is: (i) missing; (ii) detained, including incarcerated in a penal system; or (iii) outside the United States and unable to return.” Unif. Power of Att’y Act § 102(5) (Unif. Law Comm’n 2006). Similar, if not identical, definitions can be found in applicable state law. The term “incompetent” (or incompetence) could be construed to apply solely to a principal’s mental capacity, but for this Article, the two terms should generally be considered the same. An exception would be where a different interpretation for “incompetence” would be required when that term appears in the case law or the federal regulations.

8. See Seal, supra note 1, at 309–10.

9. Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191, 110 Stat. 1936 (1996) (codified as amended in scattered sections of 5–42 U.S.C.) [hereinafter HIPAA]. Regulations implementing HIPAA address the use and disclosure of individuals’ protected health information by covered entities such as group health plans. See 45 C.F.R. § 164.502(a). Specific rules apply under HIPAA for disclosures to personal representatives, family members, and friends. See 45 C.F.R. § 164.502(g). However, the Department of Health and Human Services has indicated that “a power of attorney that does not include decisions related to health care in its scope would not authorize the holder to exercise the individual’s rights under the HIPAA Primary Rule.” Office of Civil Rights, May Personal Representatives Access Health Information Based on a Non-Health Care Power of Attorney?, HHS Frequently Asked Questions, https://www.hhs.gov/hipaa/for-professionals/faq/224/may-personal-rep-access-health-information-based-on-non-healthcare-attorney/index.html.

10. See 29 U.S.C. § 1055(c). Because the analysis would be the same for the qualified pre-retirement survivor annuity and the qualified joint and survivor annuity, both will be referred to as the “survivor annuity.”

11. For simplicity, unless the context indicates otherwise, the term participant in this Article refers to both a participant and a beneficiary.

12. For example, in a group health plan, a “COBRA” health care continuation election can be made by the parent or legal guardian of a minor and may be made by a “legal representative” or the individual’s estate or spouse if the individual dies or is incapacitated. Treas. Reg. § 54.4980B-6, Q&A (6). Some plans may have language specifically authorizing the plan administrator to deal with such types of agents, if the participant is unable to act for his or her own benefit.

13. White v. Furgeson, 64 N.E. 49, 51 (Ind. App. 1902) (quoting 18 Am. & Eng. Enc. Law 871, 1st ed.).

14. Comerica Bank Tx. v. Texas Commerce Bank, 2 S.W.3d 723, 725 (Tex. App. 1999) (citing Olive-Sternenberg Lumber Co. v. Gordon, 143 S.W.2d 694, 689 (Tex. Civ. App. 1940), rev’d on other grounds, 138 Tex. 459, 159 S.W.2d 845 (1942)).

15. See Andrew H. Hook & Lisa V. Johnson, The Uniform Power of Attorney Act, 45 Real Prop. Tr. & Est. L.J. 283, 318 (2010) (“The laws relating to durable powers of attorney . . . have largely evolved from the common law of agency and are steadily moving towards a statutory framework.”).

16. See generally Kevin M. Clermont, Procedure’s Magical Number Three: Psychological Bases for Standards of Decision, Cornell Law Faculty Publications 1987; Ian Woodfield, Mozart’s “Jupiter”: A Symphony of Light?, The Musical Times, Vol. 147, no. 1897 at 25-4b (2006); 3-The Magic Number?, https://www.phactual.com/3-the-magic-number/.

17. Restatement (Third) Agency § 1.01, cmt. c. (Am. Law. Inst. 2019) (quoting 1 Floyd R. Meachem, A Treatise on the Law of Agency § 27 (2d ed. 1914)).

18. See Unif. Power of Attorney Act § 102(7) (Unif. Law Comm’n 2006).

19. See id. at § 110.

20. See id. at § 114 (3) (“[A]n agent that has accepted appointment shall . . . act only within the scope of authority granted in the power of attorney.”).

21. See id.

22. See id. § 104.

23. For more information on durable powers of attorney, see Carolyn L. Dessin, Acting as an Agent Under a Financial Durable Power of Attorney: An Unscripted Role, 75 Neb. L. Rev. 574 (1996); Alexander M. Meiklejohn, Incompetent Principals, Competent Third Parties, and the Law of Agency, 61 Ind. L.J. 115 (1986).

24. For more information on Springing Powers of Attorney, see generally John C. Craft, Preventing Exploitation and Preserving Autonomy: Making Springing Powers of Attorney the Standard, 44 U. Bal. L. Rev. 407 (2015).

25. See, e.g., Dexter v. Hall, 82 U.S. (15 Wall.) 9, 26 (1872); Beaucar v. Bristol Fed. Sav. & Loan Ass’n, 268 A.2d 679, 687 (Conn. Cir. Ct. 1969).

26. See In re Thames, 544 S.E.2d 854, 571 (S.C. Ct. App. 2001).

27. See, e.g., Tenn. Farmers Life Reassurance Co. v. Rose, 239 S.W.3d 743, 749 (Tenn. 2007) (citing Restatement (Second) of Agency § 17 (Am. Law Inst. 1958); 12 Samuel Williston, Treatise on the Law of Contracts § 35:9, at 188 (Richard A. Lord ed., 4th ed.1999)) (“Unless otherwise constrained by law or public policy, a person executing a power of attorney may empower his or her agent to do the same acts, to make the same contracts, and to achieve the same legal consequences as the principal would be personally empowered to do.”).

28. See O’Neal v. O’Neal, 803 S.E.2d 184, 189 (N.C. Ct. App. 2017). (“[W]e conclude that [the principal’s] adjudication of incompetency rendered her incapable of executing a legally operative power of attorney. The power of attorney was void.”).

29. See Golleher v. Horton, 715 P.2d 1225, 1227–28 (Ariz. Ct. App. 1985).

30. See Restatement (First) of Agency § 20 (Am. Law Inst. 1933).

31. See Unif. Power of Attorney Act § 104 (Unif. Law Comm’n 2006).

32. See, e.g., Smith v. Wachovia Bank, N.A., 33 So. 3d 1191, 1195–96 (Ala., 2009) (citing Black’s Law Dictionary (6th ed. 1990)).

33. See, e.g., M.D.M. Grp. Assoc., Inc. v. CX Reinsurance Co., 165 P.3d 882, 889 (Colo. App. 2007) (citing Restatement (Third) of Agency § 8.01 (2006)).

34. See In re Estate of Elias, 946 N.E.2d 1015, 1032–33 (Ill. App. Ct. 2011).

35. See Restatement (Third) of Agency §§ 8.01–8.11 (2006). However, if the attorney in fact is also a plan fiduciary, such as an investment adviser, ERISA should determine the substantive duties of the attorney-in-fact. See generally ERISA §§ 404–09, 29 U.S.C. §§ 1104–109. ERISA may impose stricter standards of fiduciary responsibility than imposed under state law. See Donovan v. Bierwirth, 680 F.2d 263, 272 n.8 (2d Cir. 1982); see also 29 U.S.C. § 1106 (detailing prohibitions on certain dealings with plan assets and self-dealing transactions); id. § 1109 (describing violations of the prohibited transaction rules or self-dealing rules can result in personal liability to the plan fiduciary and other equitable relief).

36. See generally Michele M. Hughes, Remedying Financial Abuse by Agents Under a Power of Attorney for Finances, 2 Marq. Elder’s Advisor 4, at 39 (2001).

37. See, e.g., Unif. Power of Attorney Act 120 (Alt. A) (Unif. Law Comm’n 2006); 20 Pa. Cons. Stat. § 5608.1; N.Y. Gen. Oblig. Law § 5-1504(1).

38. See Unif. Power of Attorney Act §§ 119(d), 120(a)(1) (Alt. A); see also 20 Pa. Cons. Stat. § 5608(e).

39. See Unif. Power of Attorney Act § 120(b)(2) (Alt. A).

40. Id. § 122.

41. See id. § 120(c)(2) (Alt. B).

42. See id. § 120(c) (Alt. A).

43. See N.Y. Gen. Oblig. Law §§ 5-1504(2), 5-1510.

44. 20 Pa. Cons. Stat. § 5608.1(c).

45. See 755 Ill. Comp. Stat. 45/2-8(d).

46. See Ind. Code § 30-5-9-9(a).

47. See Stafford v. Crane, 382 F.3d 1175, 1183–84 (10th Cir. 2004) (citing Carolyn L. Dessin, Acting as Agent Under a Financial Durable Power of Attorney: An Unscripted Role, 75 Neb. L. Rev. 574, 582 & n.38 (1996)); see also Paul L. Sturgul, Financial Durable Powers of Attorney, 41 Prac. Law. 21, 29–30 (1995).

48. See Restatement (Third) of Agency § 3.04 cmt. c (Am. Law Inst. 2019).

49. See id.

50. See In re Estate of Kurrelmeyer, 895 A.2d 207, 213 (Vt. 2006) (citing Restatement (Second) of Agency § 17 cmt. B (Am. Law Inst. 1958)) (“We agree that certain acts may require personal performance as a matter of public policy, statutory law, or under the terms of an agreement.”).

51. Wilmington Sav. Fund Society, FSB v. Needham, 204 A.3d 1277, 1280 (Me. 2019); see also Restatement (Second) of Agency § 17.

52. N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 654 (1995).

53. See Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 1480 (2018).

54. Id.

55. See N.Y. State Conf. of Blue Cross & Blue Shield Plans, 514 U.S. at 654.

56. English v. Gen. Elec. Co., 496 U.S. 72, 78 (1990).

57. See Chamber of Commerce of United States of America v. Whiting, 563 U.S. 582, 594 (2011) (quoting CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 664 (1993)).

58. See id.

59. English, 496 U.S. at 79 (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941)).

60. Id. at 79; see also Fidelity Fed. Sav. & Loan Ass’n v. De la Cuesta, 458 U.S. 141, 153 (1982).

61. Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 1480 (2018) (quoting R.J. Reynolds Tobacco Co. v. Durham Cty., 479 U.S. 130, 140 (1986)).

62. Oneok, Inc. v. Learjet, Inc., 575 U.S. 373, 384 (2015) (quoting Panhandle E. Pipeline Co. v. Pub. Serv. Comm’n, 332 U.S. 507, 517–18 (1947)).

63. See N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995).

64. Id. (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)).

65. See Altria Grp., Inc. v. Good, 555 U.S. 70, 77 (2008).

66. U.S. v. Locke, 529 U.S. 89, 108 (2000).

67. 138 S. Ct. 1461 (2018).

68. See id. at 1480.

69. ERISA § 514(a), 29 U.S.C. § 1144(a).

70. Shaw v. Delta Airlines, Inc., 463 U.S. 85, 96–97 (1983).

71. Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936, 943 (2016).

72. Id. (quoting Cal. Div. of Labor Standards Enf’t v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 325 (1997)).

73. 136 S. Ct. 936 (2016).

74. See id. at 941.

75. See id. at 943.

76. Id. (quoting Egelhoff v. Egelhoff, 532 U.S. 141, 148 (2001)).

77. See id. at 944.

78. See id. at 945.

79. See id.

80. N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995).

81. Id.

82. Shaw v. Delta Airlines, Inc., 463 U.S. 85, 100 n.21 (1983).

83. 514 U.S. 645 (1995).

84. Id. at 661.

85. 520 U.S. 806 (1997).

86. See id. at 809.

87. See id. at 815.

88. Id. at 816.

89. Id. at 815 (citing N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995); Cal. Div. of Labor Standards Enf’t v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 333–34 (1997)).

90. See infra Part IV.A; see also Richard Ruoco, Available Remedies under ERISA § 502(a), 45 Ala. L. Rev. 631, 674 (1994) (providing more information on ERISA’s civil enforcement scheme).

91. Aetna Health Inc. v. Davila, 542 U.S. 200, 209 (2004).

92. See, e.g., Haviland v. Metro. Life Ins. Co., 876 F. Supp. 2d 946, 956 (E.D. Mich. 2012). Under ERISA, state law is defined to include “all laws, decisions, rules, regulations, or other State action having the effect of law, of any State.” ERISA § 514(c), 29 U.S.C. § 1144(c)(1) (including a cause of action brought under state common law).

93. Compare Dillingham, 519 U.S. at 325–26 (declaring that the California law would be preempted if it were directed solely at ERISA plans) and Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 829 (1988) (finding Ga. Code Ann. § 18-4-22.1 preempted because it “expressly refer[red] to—indeed, solely applie[d] to—ERISA employee benefit plans”).

94. 520 U.S. 833 (1997).

95. See id. at 836.

96. See Reinforcing Iron Workers Local 426 Health & Welfare Fund v. Michigan Bell Tel. Co., 746 F. Supp. 668 (W.D. Mich. 1990) (finding the Michigan Coordination of Benefits Act preempted with respect to self-funded ERISA plans); Pension Benefit Guar. Corp. v. Boury, Inc., No. 5:02-CV-161, 2009 WL 3334924 (N.D. W.Va. Oct. 14, 2009).

97. 532 U.S. 141 (2001).

98. See id. at 147.

99. See id. at 144.

100. See id.

101. See id.

102. See id. at 145.

103. See id.

104. See id. at 144.

105. 463 U.S. 85 (1983).

106. Egelhoff v. Egelhoff, 532 U.S. 141, 147 (quoting Shaw, 463 U.S. at 97).

107. Id. (quoting Cal. Div. of Labor Standards Enf’t v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 325 (1997)).

108. Id. at 147–48.

109. See id.

110. See id. at 147.

111. 555 U.S. 285 (2009).

112. See id. at 291.

113. Id. at 298–99.

114. See id. at 303.

115. See Unif. Power of Attorney Act § 120(c) (Alt. A) (Unif. Law Comm’n 2006); 755 Ill. Comp. Stat. 45/2-8(d); Ind. Code § 30-5-9-9(a); N.Y. Gen. Oblig. Law §§ 5-1504(2), 5-1510; 20 Pa. Cons. Stat. § 5608.1(c).

116. See, e.g., Ind. Code § 30-5-9-9(a) (imposing liability for refusing “to accept the authority of an attorney in fact to exercise a power granted under a power of attorney . . .” and measuring the amount as the same liability the third party would have to the principal had the third party refused to accept the authority of the principal to act on the principal’s own behalf); 20 Pa. Cons. Stat. § 5608.1(c) (measuring damages by reference to the “pecuniary harm to the economic interests of the principal proximately caused by the person’s refusal to comply with the instructions of the agent . . . .”).

117. See generally Aetna Health Inc. v. Davila, 542 U.S. 200 (2004) (providing more complete background on ERISA’s preemption doctrine); Metro. Life Ins. Co. v. Taylor, 481 U.S. 58 (1987); Franchise Tax Bd. v. Constr. Laborers Vacation Tr., 463 U.S. 1 (1983); Avco Corp. v. Aero Lodge No. 735, Int’l Ass’n of Machinists & Aerospace Workers, 390 U.S. 557 (1968).

118. See 28 U.S.C. § 1441.

119. Id. § 1332.

120. See Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 6 (2003).

121. Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987).

122. See Beneficial Nat’l Bank, 539 U.S. at 2.

123. Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 64 (1987).

124. Id.

125. See, e.g., id. at 62–63.

126. Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004).

127. Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 146 (1985).

128. Davila, 542 U.S. at 215 (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 55 (1987)).

129. See id. at 210, 213; Aflac, Inc. v. Bloom, 948 F. Supp. 2d 1374 (M.D. Ga. 2013).

130. See ERISA § 502, 29 U.S.C. § 1132; see also 29 U.S.C. § 1109.

131. Id. § 1132(a)(3).

132. Mertens v. Hewitt Assocs., 508 U.S. 248, 256 (1993).

133. See generally CIGNA Corp. v. Amara, 536 U.S. 421 (2011).

134. 542 U.S. 200, 210 (2004).

135. Id.

136. See generally Aflac, Inc. v. Bloom, 948 F. Supp. 2d 1374 (M.D. Ga. 2013).

137. Davila, 542 U.S. at 210.

138. See id. at 213.

139. Id.

140. Id.

141. Gardner v. Heartland Indus. Partners, LP, 715 F.3d 609, 613 (6th Cir. 2013).

142. N.J. Carpenters v. Tishman Const. Corp. of N.J., 760 F.3d 297, 303 (3d Cir. 2014) (quoting Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 950 (9th Cir. 2009)).

143. Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936, 943 (2016) (quoting Cal. Div. of Labor Standards Enf’t v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 325 (1997)).

144. See generally Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 1480 (2018).

145. See Gobeille, 136 S. Ct. at 943–45 (2016).

146. Id. at 943 (quoting Egelhoff, 532 U.S. at 148 (2001)).

147. See id.

148. De Buono v. NYSA-ILA Medical and Clinical Services Fund, 520 U.S. 806, 815 (1997).

149. See ERISA § 403(a), 29 U.S.C. § 1103(a).

150. See id. § 1055(c)(2).

151. See id. § 1002(8).

152. See Gobeille, 136 S. Ct. at 943.

153. See 29 C.F.R. § 2520.1046-1(a).

154. See 29 C.F.R. § 2560.503-1(b)(4).

155. See Unif. Power of Attorney Act § 102(5) (Unif. Law Comm’n 2006).

156. 29 U.S.C. § 1024(b)(4).

157. See id. § 1025(a)(1)(A)(iii), (1)(B)(ii).

158. See id. § 1132(a)(1)(A), (c)(1); see also 29 C.F.R. § 2575.502c-1 (1999).

159. 29 C.F.R. § 2520.104b-1(b)(2).

160. See Advisory Opinion 79-82A (1979), 1979 WL 7019.

161. See id.

162. See id. Some plans may require a specific form to authorize release of confidential personal information, such as that typically found on the participant’s individual benefit statement.

163. Id.

164. See Advisory Opinion 82-21A (1982), 1982 ERISA Lexis 48.

165. See id.

166. See id.

167. See id.

168. Id.

169. ERISA § 502(c)(1) only authorizes penalties if the administrator fails to “mail[ ] the material requested to the last known address of the requesting participant . . . .” ERISA § 502(c)(1), 29 U.S.C. § 132(c)(1) (emphasis added). Construing the advisory opinions to authorize a penalty (in the court’s discretion) where the administrator furnishes requested disclosures to the participant’s address would conflict with this express statutory language. The result is an administrator has a duty under section 104 or section 105 to furnish the disclosures to a third party, but the participant would have no remedy under section 502(c)(1) if the administrator furnished the documents to the participant’s address. Plan administrators who are uncertain about a third party’s authority, and who lack time to verify the authority—perhaps due to an unexpected administrative delay—should at a minimum send the documents to the participant’s last known address.

170. See Charles S. Crase & Richard A. Bales, Why a Written Request for Plan Documents by an Attorney Representing a Plan Participant or Beneficiary Should Trigger a Plan Administrator’s Duty of Disclosure Under ERISA, 29 U.S.C. § 1024(B)(4), 32 Cap. U. L. Rev. 803 (2003). This article discusses a split between the Sixth Circuit and other courts of appeals. The article was published, however, prior to Minadeo v. ICI Paints, 398 F.3d 751 (6th Cir. 2015) (discussed below). With Minadeo, it appears the circuit split may not be as wide as previously thought.

171. 578 F. Supp. 605 (E.D. Pa. 1983).

172. Id. at 616.

173. 744 F. Supp. 1061 (M.D. Ala. 1988).

174. See id. at 1065–66.

175. 21 F.3d 1499 (10th Cir. 1994).

176. See id. at 1502–504 (“An attorney . . . is entitled to request plan information on behalf of the participant . . . .”) (citing Curry, 744. F. Supp. at 1064); see also Bombardier Aerosmith Emp. Welfare Benefits Plan v. Ferrer, Poirot and Wansbrough, 354 F.3d 348 (5th Cir. 2003) (declaring categorically that a participant’s attorney is “indisputably [the participant’s] agent” for purposes of the participant’s constructive possession of funds subject to appropriate equitable relief under ERISA § 502(a)(3)), abrogated on other grounds by ACS Recovery Servs., Inc. v. Griffin, 723 F.3d 518 (5th Cir. 2013).

177. 29 F.3d 1062 (6th Cir. 1994).

178. See id. at 1072.

179. 263 F.3d 66 (3d Cir. 2001).

180. See id. at 77; see also supra note 170 and accompanying text.

181. Id. at 77.

182. 398 F.3d 751 (6th Cir. 2005).

183. See id. at 754–55.

184. See id. at 756.

185. See id.

186. See id.

187. See id. at 757.

188. See id.

189. Id.

190. Id. at 758.

191. Id. at 757 (quoting H.R. Rep. No. 93-533 p.11 (1973)).

192. Id. at 758.

193. Id. (quoting Daniels v. Thomas & Betts Corp., 263 F.3d 66, 77 (3d Cir. 2001)).

194. See ERISA § 503, 29 U.S.C. § 1133.

195. 29 C.F.R. § 2560.503-1.

196. Id. § 2560.503-1(b)(4).

197. See Employee Benefits, 42 Fed. Reg. 27,426, 27,429 (May 27, 1977) (requiring plans to adopt procedures to permit a claimant or his duly authorized representative to appeal a denied claim).

198. See ERISA, 63 Fed. Reg. 48,390, 48,392 (Sept. 9, 1998).

199. ERISA, 65 Fed. Reg. 70,264, 70,255 (Nov. 21, 2000).

200. Insured health plans would generally follow state law. For example, some states define “authorized representative” for purposes of their health insurance claims regulations. Compare W.Va. Code R. § 144-95-2.3, with Utilization Review and Benefit Determination Model Act, § 3B (NAIC Apr. 2010). To the extent such rules constitute a “law of [a] State which regulates insurance,” they would be saved from ERISA preemption by ERISA § 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A).

201. U.S. Dept. of Labor, https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/benefit-claims-procedure-regulation.

202. See id.

203. See Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936, 946 (2016).

204. A related question is whether a claims procedure may require claimants to use a power of attorney. This is not generally recommended. A requirement to designate a representative with a power of attorney would likely be unreasonable where, for example, state law requires the power of attorney to be notarized and signed by two witnesses who are independent of the claimant and the notary.

205. Jenkins v. Yager, 444 F.3d 916, 920 (7th Cir. 2006).

206. See id. at 922; see also 29 C.F.R. § 2509.75-8 (2019). A directed trustee is one that under the plan’s terms is subject to the direction of a named fiduciary. See ERISA § 403(a), 29 U.S.C. § 1103(a). An investment manager is a registered investment adviser, a bank, or an insurance company that has the power to manage, acquire, or dispose of plan assets and that acknowledges in writing that it is a fiduciary of the plan. See id. § 1002(38).

207. See id. § 1105(c)(1).

208. See id. § 1105(c)(3).

209. See id. § 1105(c)(3).

210. See 444 F.3d at 924.

211. See id.

212. In nonbinding, sub-regulatory guidance, Q9 of the Department of Labor’s “Reservists Called to Active Duty FAQs” suggests another exception:

Q9: I am a participant in a 401(k) plan. While I am on active duty, may I give my spouse or another individual the authority to change my investment allocations through a power of attorney or other legal document? Can that individual also apply for a participant loan or hardship withdrawal on my behalf?

The terms of the plan would generally govern this situation. However, if some employees are permitted to designate individuals to act on their behalf in other contexts when they are away from work, the employer should permit the service member to designate someone to act on his or her behalf.

U.S. Dept. of Labor, https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/reservists-being-called-to-active-duty.pdf. This right may be available under USERRA, which is not preempted by ERISA, or permitted by the use of a military power of attorney, which is governed by federal law. See 10 U.S.C. § 1044(b). The exception in the FAQ should not be extended to circumstances not covered by USERRA or another federal statute pertaining to the military.

213. ERISA section 404(c) relieves fiduciaries of fiduciary liability for losses that result from the participant’s exercise of control of the assets held in the participant’s individual account, provided the plan satisfies the requirements of section 404(c). Cf. 29 C.F.R. § 2550.404(c)-1(f)(9) (permitting a participant to designate an investment manager who will have discretionary investment authority over the participant’s account in an ERISA section 404(c) plan).

214. See 444 F.3d at 926.

215. See id. at 923.

216. See id. at 924.

217. The terms brokerage window and self-directed brokerage account are not clearly defined. See Standards for Brokerage Windows in Participant-Directed Individual Account Plans, 79 Fed. Reg. 49,469 (Aug. 21, 2014). Here, the terms are intended to reflect an arrangement (or similar arrangements) under which a plan trustee, acting at the participant’s direction, enters into a contract with a broker or investment advisor selected by the participant. The trustee transfers all or a portion of the participant’s account to the broker or advisor to act as a subcustodian for the plan. Then (ideally), the participant directs the broker or advisor on how to invest the participant’s account.

218. Under UPA section 201(a)(7), a power of attorney does not delegate a principal’s fiduciary responsibilities unless the power grants that specific authority, and then only to the extent the principal has the power to delegate fiduciary authority. See Unif. Power of Attorney Act § 201(a)(7) (Unif. Law Comm’n 2006). To the extent ERISA precludes a delegation of fiduciary authority, this issue can be resolved with an interpretation of the power of attorney. However, UPA section 215(b)(5) provides that language in a power of attorney granting general authority with respect to retirement plans authorizes the agent to exercise investment powers available under a retirement plan. See id. § 215(b)(5). The issue is not about a delegation of fiduciary responsibility; it is about ERISA’s restrictions on who can have discretion to manage plan assets.

219. See ERISA § 205, 29 U.S.C. § 1055; see also I.R.C. §§ 401(a)(11), 417.

220. See 29 U.S.C. § 1005(c)(1).

221. See id. § 1005(c)(2)(A).

222. See Treas. Reg. § 1.401(a)-20, Q&As 3, 5.

223. See id. Q&A 27.

224. 29 U.S.C. § 1005(c)(2)(B).

225. See Treas. Reg. § 1.401(a)-20, Q&A 27.

226. See id.

227. Andrus v. Glover Constr. Co., 446 U.S. 608, 616–17 (1980); see also TRW Inc. v. Andrews, 534 U.S. 19, 28 (2001).

228. See supra notes 50–51 and accompanying text; see also Wilmington Sav. Fund Society, FSB v. Needham, 204 A.3d 1277, 1290 (Me. 2019); In re Estate of Korrelmeyer, 895 A.2d 207, 213 (Vt. 2006).

229. See Treas. Reg. § 1417(a)(3)-1(a); see also Treas. Reg. § 1.417(e)-1(b)(3); Prop. Treas. Reg. § 1.417(e)-1; Pension Protection Act of 2006 § 1102(a)(1)(B) (2006).

230. See Miller v. CBS Retirement Plan, No. 12 Civ. 3697 (KBF), 2013 WL 864610 *1, *6 (S.D.N.Y. Mar. 7, 2013).

231. See Hagwood v. Newton, 282 F.3d 285, 290 (4th Cir. 2002) (“ERISA’s [spousal waiver] formalities must . . . be strictly enforced.”).

232. ERISA § 3(8), 29 U.S.C. § 1002(8).

233. See, e.g., Baldwin v. Univ. of Pittsburgh Med. Ctr., 636 F.3d 69, 74–75 (3d Cir. 2011).

234. See, e.g., 29 U.S.C. § 1024(b)(4).

235. See id. § 1002(8).

236. Metro. Life Ins. Co. v. Johnson, 297 F.3d 558, 564 (7th Cir. 2002) (citing Phoenix Mut. Life Ins. Co. v. Adams, 30 F.3d 554, 559 (4th Cir. 1994)).

237. See Egelhoff v. Egelhoff, 532 U.S. 141, 147-48 (2001).

238. See supra Part VI and Treas. Reg. § 1.401(a)-20, Q&A 3.

239. Civ. Action No. 1:12-cv-238, 2013 WL 6147672 (W.D. Pa. Nov. 22, 2013).

240. See id. at *3.

241. See id.

242. See id.

243. Id. at *4 n.3.

244. See id. at *2.

245. See id.

246. See id. at *3.

247. See id.

248. See id. at *4.

249. See id.

250. See id. at *4 n.3.

251. See id.

252. See id.

253. Id. at *17 (citing Kennedy v. Plan Adm’r for DuPont Sav. & Inv. Plan, 555 U.S. 285, 301 (2009)).

254. The opinion does not discuss whether the plan administrator had discretion to interpret the plan or to decide the neighbor’s eligibility for benefits, whether the administrator exercised any such discretion for this claim, or whether the administrator interpreted the plan to preclude the use of a power of attorney to change a beneficiary. It thus appears the court applied a de novo interpretation of the plan. (A de novo review is appropriate, even where the plan grants discretion to the fiduciary, if the plan fiduciary fails to exercise the discretion. See Gritzer v. CBS, Inc., 275 F.3d 291, 296 (3d Cir. 2002)). Interestingly, however, the plan administrator denied the neighbor’s claim, not because the plan would accept no power of attorney, but because the administrator interpreted the power of attorney at issue not to give the neighbor authority to change the beneficiary. See Morrison, 2013 WL 6147672, at *8.

255. See generally Sun Life Assurance Co. of Canada, No. ELH-17-434, 2018 U.S. Dist. LEXIS 18139 (D. Md. Feb. 5, 2018); Metro. Life Ins. Co. v. Ivie, No. 1:15-cv-01896-TWP-MPB, 2017 U.S. Dist. LEXIS 623909 (S.D. Ind. Apr. 15, 2017); Hall v. Lockheed Martin Corp., No. 4:13-cv-188-A, 2014 U.S. Dist. LEXIS 15368 (N.D. Tex. Feb. 6, 2014); Heileman-Balt. Local 1010 IBT Pension Plan v. Bullinger, No. HAR 92-204, 1992 U.S. Dist. LEXIS 17325 (D. Md. Oct. 29, 1992); Metro. Life Ins. Co. v. Hall, 9 F. Supp. 2d 560 (D. Md. 1998).

256. In his Egelhoff dissent, Justice Breyer suggests plans may also draft around non-preempted state laws that provide a default rule for the disposition of benefits that fall under the rubric of state “background property or inheritance law.” Egelhoff v. Egelhoff, 532 U.S. 141, 155 (2001) (Breyer, J. dissenting).

257. Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936, 945 (2016).

258. Pharm. Care Mgmt. Ass’n v. Gerhart, 852 F.3d 722, 730 (8th Cir. 2017) (quoting Fort Halifax Packing Co., Inc. v. Cayne, 482 U.S. 1, 9 (1987)).

259. See Egelhoff, 532 U.S. at 147.

260. See ERISA § 3(8), 29 U.S.C. § 1002(8).

261. Id. In addition to looking at whether the plan’s terms permit or prohibit the use of a power of attorney (or whether the sponsor interprets the plan to permit or prohibit the use of a power of attorney), plan administrators should consider the requirements of the claims’ regulations at 29 C.F.R. section 1.503-1(b)(5). That provision requires a plan’s claims procedures to include “administrative processes and safeguards designed to ensure and to verify that benefit claim determinations are made in accordance with governing plan documents and that, where appropriate, the plan provisions have been applied consistently with respect to similarly situated claimants.” 29 C.F.R. § 1.503-1(b)(5). If a plan administrator has accepted a power of attorney in the past, this regulation could potentially require the administrator to accept a power of attorney in similar situations.

262. 787 F. Supp. 93 (E.D. Pa. 1992).

263. See id. at 94. The issue concerned whether the power of attorney in that case should be construed to grant this authority, not the legal effect of a power of attorney which otherwise does give the agent this authority.

264. See id. at 98 (citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987)).

265. See id. at 98.

266. See Restatement (Second) of Agency § 37 (Am. Law Inst. 1958).

267. See id. cmt. a.

268. Civ. Action No. 2:13-cv-00405-JMS-MJD, 2014 WL 5599064 (S.D. Ind. Nov. 4, 2004).

269. See id. at *8.

270. See id.

271. Id.

272. Id.

273. Shaw v. Delta Airlines, Inc., 463 U.S. 85, 100 n.21 (1983).

274. In re Shafer, 2014 W.L. 5599064 at *8.

275. 276 F. Supp. 3d 292 (D.N.J. 2017).

276. See id. at 293.

277. See id. The opinion does not mention whether plaintiff also sent the plan the power of attorney, or how the plan responded, if at all.

278. See id. at 293.

279. See id. at 293–94.

280. See id. at 294.

281. See id.

282. See id. Other cases that consider powers of attorney and beneficiary changes consider whether the state law doctrine or federal law doctrine of substantial compliance should apply. See Teachers Ins. & Annuity Ass’n of Am. v. Bernardo, 683 F. Supp. 2d 344 (E.D. Pa. 2010) and cases discussed therein.

283. See ERISA § 502(a), 29 U.S.C. § 1132(a).

284. See id. § 1132(a)(1)(B).

285. See id. § 1132(a)(1)(B), (C).

286. See id. § 1132(a)(1)(A), (C).

287. See 542 U.S. 200, 210 (2004).

288. 787 F. Supp. 93 (E.D. Pa. 1992).

289. See id. at 95. The agent attempted to change the beneficiary designation to his mother, not himself.

290. See id.

291. See id.

292. See id. at 94–95.

293. See id. at 98.

294. See id.

295. See Fifth Third Bankcorp. v. Dudenoeffer, 573 U.S. 409, 421 (2014).

296. The breach could be a breach against the participant, the existing beneficiary, or both.

297. See supra notes 160–163, 168 and accompanying text.

298. See ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3).

299. See id. § 1132(c)(3).

300. Id. § 1132(c); Aetna Health Inc. v. Davila, 542 U.S. 200, 209 (2004).

301. See 29 U.S.C. § 1132(g)(1).

302. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989) (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987)), superseded by statute, 29 U.S.C. § 1144(b)(7).

303. Nachwalter v. Christie, 805 F.2d 956, 959–60 (11th Cir. 1986) (internal citations omitted).

304. Local 6-0682 Int’l Union of Paper v. Nat’l Indus. Grp. Pension Plan, 342 F.3d 606, 609 (6th Cir. 2003) (internal citations omitted) (quoting Muse v. IBM, 103 F.3d 490, 495 (6th Cir. 1996) and Tassinare v. Am. Nat’l Ins. Co., 32 F.3d 220, 225 (6th Cir. 1994)).

305. Black & Decker Disability Plan v. Nord, 538 U.S. 822, 831 (2003) (citing Milwaukee v. Illinois, 451 U.S. 304, 317–32 (1981)). Thus, for example, courts might be reluctant to develop a federal common law in connection with the recognition of participants’ agents for ERISA’s disclosure and benefit claims purposes, or spousal consent to a waiver of the survivor annuity, because the Department and the Service have issued regulations in those areas.

306. 538 U.S. 822 (2003).

307. See id. at 825.

308. See id. at 833–34.

309. Kennedy v. Plan Adm’r for DuPont Sav. & Inv. Plan, 555 U.S. 285, 300 (2009) (quoting ERISA § 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D)).

310. See id. at 300–04.

311. See id.

312. See id.

313. See ERISA § 404(a)–(b)(1), 29 U.S.C. § 1104(a)–(b)(1).

314. No. 98 C 0929, 1999 WL 782027 (N.D. Ill. Sep. 27, 1999).

315. See id. at *1.

316. See id. at *4. In this case, the fiduciary had a power of attorney policy but failed to follow it.

317. 353 F. Supp. 3d 110 (D. Ma. 2018).

318. See id. at 114–15

319. The agent was also an attorney-at-law and the sister of the designated beneficiary. See id. at 114. Fraud isn’t always possible or practical to uncover. Had the plan requested evidence of the beneficiary’s incapacity, there is no reason to believe the attorney, who had already forged a power of attorney, would not also forge a doctor’s note.

320. See ERISA § 404(a)–(b)(1), 29 U.S.C. § 1104(a)–(b)(1).

321. That a principal and agent are distinct legal entities is clear from the law of agency. For example, an agent that acts within the scope of its authority is not liable for the principal’s obligations under a contract that the agent negotiates or executes on behalf of the principal. See Babul v. Golden Fuel, Inc., 990 So. 2d 680, 684 (Fla. Dist. Ct. App. 2008). There are many other circumstances where an agent is not liable for the principal’s acts.

322. See Daniel A. Wentworth, Durable Powers of Attorney: Considering the Financial Institution’s Perspective, Prob. & Prop., Nov.-Dec. 2003, at 37, 37.

323. Id. at 38 (emphasis in original).

324. See generally 29 U.S.C. § 1104(a)(1).

325. A discussion of how ERISA’s fiduciary standards may apply with respect to the protection of participants’ accounts is beyond the scope of this Article, but it is a best practice for plan fiduciaries to implement procedures for safeguarding plan data and plan assets.

326. See 29 U.S.C. § 1001(b).

327. See 29 C.F.R. § 2560.503-1(b)(4).

328. See generally 29 U.S.C. § 1104(a)-(b)(1).

329. For example, a plan sponsor likely would not want an agent acting under a power of attorney to attend an in-house enrollment meeting or an investment educational meeting provided to participants by the plan’s advisor.

330. See id. § 1104(a)(1)(a)(ii).

331. Keys v. Eastman Kodak, 739 F. Supp. 135, 138 (W.D.N.Y. 1990).

332. See generally 29 U.S.C. § 1104(a)(1)(B) (“a fiduciary shall discharge his duties . . . with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and family with such matters would use in the conduct of an enterprise of a like character and with like aims”).

333. See, e.g., Unif. Power of Att’y Act §§ 119(d)(1), 302 (Unif. Law Comm’n 2006).

334. See 29 U.S.C. § 1002(38).

335. Participants would need to be notified of this feature before they become incapacitated. See id. § 1002(38).

336. See id. § 1104(c)(5); 29 C.F.R. § 2550.404(c)-5 (discussing the rules governing qualified default investments).

337. See Estate of Wrage v. Tracey, 550 N.E.2d 1115, 1120 (Ill. App. Ct. 1990) (“Any such agency relationship terminate[s] upon the death of the principal.”).

338. Consider a decedent who is on his deathbed and is incapable of electing the form of pension payout by election due date. Although a lump sum is available under the plan, a single life annuity will be distributed in the absence of a timely election. In this situation, the payment of the benefits in a single life annuity could result in the loss of the entire value of the benefit.

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