This unanimous decision resolved a split in the lower courts over a fact pattern regularly faced by administrators of ERISA plans when an employee and spouse are divorced, but the employee dies before changing the beneficiary designation for benefits. In Kennedy, the Supreme Court held that, notwithstanding the contrary terms of a divorce decree, the former spouse was entitled to receive payment from the plan because the divorce decree could not overcome the express terms of a plan document.

The decedent, William Kennedy, worked for E.I. DuPont de Nemours & Company and was a participant in its savings and investment plan (SIP) with power both to “designate any beneficiary or beneficiaries… to receive all or part of the funds upon his death, and to replace or revoke such designation.” The plan required “all authorizations, designations and requests concerning the Plan to be made by employees in the manner prescribed by the plan administrator” and provided forms for designating or changing a beneficiary. If at the time the participant died “no surviving spouse exists and no beneficiary designation is in effect,” the plan stated that distribution would be made to, or in accordance with the directions of, the executor or administrator of the decedent’s estate.

In 1971, William married Liv Kennedy. Three years later, he signed a form designating her to take benefits under the SIP, but naming no contingent beneficiary to take if she disclaimed her interest. William and Liv divorced in 1994, subject to a decree that Liv “is divested of all right, title, interest, and claim in and to any and all sums the proceeds from, and any other rights related to any retirement plan, pension plan, or like benefit program existing by reason of [William’s] past or present or future employment.” William did not, however, execute any documents removing Liv as the SIP beneficiary, even though he did execute a new beneficiary designation form naming his daughter, Kari Kennedy, as the beneficiary under DuPont’s pension and retirement plan, also governed by ERISA. Upon William’s death in 2001, petitioner Kari Kennedy was named executrix and asked DuPont to distribute the SIP funds to William’s estate. DuPont, instead, relied on William’s designation form and paid the balance of some $400,000 to Liv. The estate then sued respondents DuPont and the SIP plan administrator, claiming that the divorce decree amounted to a waiver of the SIP benefits on Liv’s part, and that DuPont had violated ERISA by paying the benefits to William’s designee.

The Court held that the plan administrator did its ERISA duty by paying the SIP benefits to Liv in conformity with the plan documents. Under ERISA, the plan administrator is obligated to act “in accordance with the documents and instruments governing the plan” insofar as such documents and instruments are consistent with the provisions of Title I and Title IV of ERISA. The Act provides no exemption from this duty when it comes time to pay benefits. By giving a plan participant a clear set of instructions for making his own instructions clear, ERISA forecloses any justification for inquiries into expressions of intent. The Court reasoned that less certain rules could force plan administrators to examine numerous external documents purporting to be waivers and draw them into litigation over the meaning and enforceability of those waivers.

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This entry was posted by Adam V. Russo on Friday, July 9th, 2010 at 1:36 pm and is filed under ERISA, Preemption, Summary Plan Description, Supreme Court. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.