Considering the high divorce rate in the , the traditional, romanticized story of marriage is becoming the exception rather than the rule. Although it may not be immediately apparent, this fact has significant implications for the dispersal of employee welfare and pension plan benefits, one of the most widely held assets among workers in the United States.
During marriage, an employee will usually designate her current spouse as the beneficiary of her plan benefits. When a couple divorces, each will typically agree in a marital settlement agreement, expressed through a divorce decree, that they will relinquish all claims to benefits resulting from the ex-spouse’s employee benefit plan. This seems relatively uncomplicated, but what happens when an employee neglects to change the beneficiary designation form on file with her plan, and after her death, the plan administrator declines to honor the divorce decree, instead giving the benefits proceeds to the ex-spouse over the objections of the employee’s estate?
This situation is the basis for the dispute that is the subject of this note, Kennedy v. Plan Administrator for DuPont Savings and Investment Plan. In this case, William Kennedy, a participant in a benefit plan, named his then wife Liv Kennedy as the designated beneficiary of his plan benefits. The couple later divorced, at which time Liv agreed to waive all interest in William’s benefit plan, but William failed to change the beneficiary designation form on file with his plan administrator before it was too late. After his death, his daughter, Kari Kennedy, requested that his plan benefits be given to his estate, but the plan administrator refused, and gave the funds to Liv despite her divorce waiver. The Supreme Court, in a unanimous decision, found that although Liv’s waiver was valid, the plan administrator did its statutory duty under the Employee Retirement Income Security Act of 1974 (ERISA) by ignoring the waiver in favor of the plan documents naming Liv as the designated beneficiary.
This Note will argue that while the Supreme Court correctly found that Liv’s divorce decree waiver did not violate ERISA’s prohibition on assignment or alienation, it incorrectly held that under ERISA, plan administrators are required to disperse plan benefits in accordance with a participant’s beneficiary designation form over a conflicting federal common law waiver. Instead, the Court should have used a federal common law approach to find that an ERISA benefit plan administrator is required to enforce a beneficiary’s waiver of her benefit interest if her waiver was explicit, voluntary, and made in good faith. This approach is consistent with the text of ERISA, the statute’s underlying purposes, the majority of federal and state courts, and is equitable. Under this approach, the DuPont plan administrator would have been required to disperse the savings and investment plan (SIP) benefits to William’s estate as Liv’s waiver explicitly disclaimed any and all interest in William’s employment benefits.
Part II of this Note will give an overview of the law surrounding this issue, including ERISA itself, as well as the different circuit court approaches to disputes similar to the one presented here. Part III will describe the facts of the case, and Part IV will summarize the Supreme Court’s opinion, including its holding and reasoning. Part V presents an analysis of the Court’s holding, and argues that the Court should have adopted a federal common law approach to Kennedy-type disputes because this approach is more consistent with the text and underlying policies of ERISA, and provides a more equitable resolution to such disputes. Finally, Part VI discusses the potential impact of the Court’s holding in Kennedy on parties, courts, and practitioners.