Monday, February 2, 2009

Feuer on the Kennedy Case

Supreme_court_2 Albert Feuer, who has provided us with valuable analysis of Kennedy v. DuPont as it was pending before the Supreme Court, has now done the same for the Court's final decision.  He will have a more extensive discussion of the case in his article, “Will the Supreme Court Reinforce or Undermine Basic ERISA Principles When it Decides a Death Benefit Dispute,” which is to be published soon in the Charleston Law Review.  In the meantime, he's prepared a shorter analysis of the case .  A preview of that analysis:

In Kennedy v. DuPont Savings and Investment Plan (the “DuPont Plan”), the Supreme Court decided that if a voluntary disclaimer in a domestic relations order (“DRO”) by the divorcing spouse of an ERISA pension plan participant did not comply with the terms of the governing plan documents, the plan could pay the death benefit only to the participant’s designee, who was the former spouse and disclaimant. The Court agreed with the former spouse that her disclaimer was ineffective. Thus, the plan administrator correctly denied the claim of the participant’s default designee. The decision raises at least six troubling questions for family law practitioners, ERISA practitioners, ERISA plan sponsors, administrators, participants and administrators.

According to Feuer, four of the more troubling points of the decision are:

The Supreme Court decision did not provide that a plan administrator must always disregard disclaimers in divorce decrees.  Administrators may have the discretion to follow disclaimers.  Moreover, those plans which allow no beneficiary disclaimers may have to consider disclaimers in divorce decrees regardless of plan terms. 

The Supreme Court decision suggests that ERISA does not permit benefit claims based on QDROs for those plans, whose documents do not explicitly incorporate the ERISA requirement that benefit entitlements are determined in accord with the terms of a QDRO. More generally the Court suggested that benefit claims may not be based on ERISA requirements not incorporated in plan documents.

The Supreme Court decision suggests that QDROs may not be used by divorcing spouses to retain survivor benefits in divorce decrees.  Classical defined benefit plans that provide survivor benefits only to the spouses of participants thus may no longer permit such retentions.

The Supreme Court decision also suggests that ERISA benefit entitlements are limited to the right to receive the benefits from an ERISA plan but does not include the right to keep the benefits.

Check out this must-read piece!


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