Thursday, October 4, 2012

Feuer on How the Supreme Court and the Department of Labor May Dispel Myths About ERISA’S Family Law Provisions

ErisaFriend of the blog, Albert Feuer, has recently posted his piece from the John Marshall Law Review on SSRN entitled: How the Supreme Court and the Department of Labor May Dispel Myths About ERISA’S Family Law Provisions and Protect the Benefit Entitlements that Arise Thereunder.

Here is the abstract:

This Article discusses the interaction between ERISA and family law (i.e., domestic relations law and estates law). The Supreme Court and the US Department of Labor (“DOL”) may improve the practice of both ERISA and family law by dispelling myths that they have reinforced.

First, the Court incorrectly asserted that the Retirement Equity Act of 1984 (“REACT”) “enhanced protection to the spouse and dependent children in the event of divorce or separation, and in the event of death the surviving spouse.” This assertion has encouraged plan administrators and other courts to find that domestic relations orders (“DROs”) govern an excessively broad class of ERISA pension and life insurance benefits. However, REACT, like ERISA, was a reaction to the inadequacies of state law and prior federal law pertaining to domestic relations and estate law. Thus, it similarly circumscribed the role of state law and increased substantive protections for ERISA participants and beneficiaries.

Second, the Court added a gloss to ERISA in non-family law contexts that emphasizes the importance of limiting the cost burdens imposed on employers by ERISA, which, if excessive, would discourage employers from establishing and maintaining employee benefit plans. This gloss has encouraged other courts to lose sight of the leitmotif of ERISA, protecting plan benefits of participants and beneficiaries. Thus, courts have wrongfully permitted individuals to use superseded (state family law or federal common law) ownership claims to obtain benefit entitlements from the recipients of those entitlements rather than the plans. Such holdings violate Supreme Court decisions extending over more than a hundred years, which consistently protected ERISA entitlements and other federal entitlements, before and after their distribution.

The DOL has created issues by both its actions and inactions. First, the DOL incorrectly asserted that the ERISA benefit claim provisions should not govern plan reviews of DRO for compliance with the pertinent ERISA requirements, the qualified domestic relations order (“QDRO”) requirements, but has failed to present an alternative set of review provisions for plans to follow. This has created unnecessary issues concerning the roles of plan administrators, participants, their families, and courts in such reviews Second, the DOL has provided only nonbinding, informal guidance to the general public rather than extensive DOL regulations with respect the QDRO requirements. This has created unnecessary issues for persons seeking to prepare a DRO that complies with the pertinent ERISA requirements, and for plan administrators responding to such requests.

This article is an important addition to scholarship in the area of domestic relations law and estates law as it concerns the the effectiveness of ERISA plan beneficiary designations.  This aspect of ERISA law has become quite muddled and Albert's suggested changes may indeed help courts and practitioners in the future when it comes to handling these types of issues.

PS

http://lawprofessors.typepad.com/laborprof_blog/2012/10/feuer-on-how-the-supreme-court-and-the-department-of-labor-may-dispel-myths-about-erisas-family-law-.html

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