Wednesday, October 29, 2008

Kennedy ERISA Participants to Brief Plan Document Issue for Supreme Court

4united_states_supreme_court_112904 This is not wholly unpredictable, but the Supreme Court in the ERISA case of Kennedy v. DuPont Savings Plan told the parties to brief an issue that pretty much dominated oral argument.

From SCOTUSBlog:

The Supreme Court on Tuesday ordered lawyers to file new briefs by Nov. 10 on a new issue in a pending case testing a divorced spouse’s right to the other spouse’s pension benefits.  The question was posed in Kennedy v. DuPont Savings Plan Administrator (07-636) — a case heard by the Justices on Oct. 7.  The new question tests the application to the case of a part of federal benefit law that requires benefit plan administrators to operate the plan as dictated by plan documents — an issue that the Court appeared previously to have declined to hear . . . .

The Court granted review only of that specific issue on the proper way to waive benefit entitlement.  The appeal had raised three other questions, one of which tested whether the plan documents of an ERISA pension plan governed distributions.  Even so, both sides discussed the plan documents section of ERISA in their briefs, and the U.S. Solicitor General, joining in the case as an amicus taking a seemingly neutral stance, said that “consideration of the plan documents is critical in evaluating whether the court of appeals reached the correct result in this case.”  The Solicitor General argued further: “ERISA requires a plan administrator to distribute benefits to the beneficiary designated by the participant under the terms of the plan.  A waiver that is not given effect consistent with the provisions of the plan documents cannot trump the terms of the plan.  Thus, the appropriate mechanism for eliminating the beneficiary interest of an ex-spouse is for the participant to change the beneficiary designation in accordance with plan terms.  That process is generally not difficult.  But in all events, the entry of a divorce decree purporting to waive the non-participant spouse’s interest is neither necessary nor sufficient to accomplish that end.”

On Tuesday, the Court posed this new question: “Whether 29 U.S.C. 1104(a)(1)(D), mandating administration of a plan in accordance with plan documents, required that the distribution in question be made to Liv Kennedy, even on the assumption that a waiver of her interest was not otherwise subject to statutory bar.”

So, this is turned into a breach of fiduciary issue under Section 404(a)(1)(D) and failure to follow the terms of the plan.   As I argued in my previous analysis of this case, the shift toward the plan document seems to go against petitioner as "there were means for participants and beneficiaries to make a change, and they weren't followed here."

So I see this as a good sign for the retirement plan, but we shall see.


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