Recent Supreme Court's Ruling May Require ERISA Plan Administrators To Do Total Recall And Overhaul Of Some Provisions Of QDRO: The Impact Of Kennedy v. Plan Administrator for DuPont Savings and Investment Plan
The CC just realized it misread the opinion Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 555 U.S. ___ (2009). CC thought the case was about Kuato from the Arnold Schwarzenegger classic Total Recall,
and that this was an environmental case. No, turns out it's QDRO and
it's a "domestic relations case impact on ERISA plan case." That's
QDRO, as in Qualified Domestic Relations Order, which is, under ERISA §
206(d)(3)(B)(i), "a domestic relations order that creates or recognizes
the existence of an alternate payee's right to receive, or assigns to
an alternate payee the right to receive, all or a portion of the
benefits payable with respect to a participant under a retirement plan,
and that includes certain information and meets certain other
requirements."
Anyway, William Kennedy was a DuPont employee and participant
in its ERISA plan, which was called the Savings and Investment Plan
(SIP), hence the defendant's nomenclature. In 1974, he named his wife
as his beneficiary under the SIP. Then they got divorced, and he
remarried, but he never undesignated the first wife in the SIP, even
though he did so under DuPont's defined benefits plan. Also, the
dissolution of marriage decree stated that the wife gave up her right
to William's pension benefits. William passed away, and DuPont gave the
first wife the benefits under the SIP. You can see where this is going.
That's right, all the way to the Supreme Court for a 9-0 decision in
favor of the SIP. So how can a unanimous win send ERISA plan
administrators scurrying to reexamine every piece of paper they have in
their plan files?
Supreme Court Resolves Conflict Between Beneficiary Designation and Divorce Decree, comes to us courtesy of John M. Vine (Covington & Burling LLP) and constitutes the written materials accompanying Kari Kennedy v. DuPont: Ask Not What Your QDRO Can Do for You, the recent PLI briefing he co-chaired. The three-page memo from the firm's Employee Benefits and Executive Compensation practice gives a lot more background on the case and more incisive analysis of the Court's decision. And it also answers the question about why this has ERISA plan administrators running. It's because the Supreme Court decision included some interesting language on the potential impact of QDROs (and even divorce settlements that are not QDRO) on designations of death benefits. The CC will leave you to Vine's work for all the details, but there are two important takeaways that flow from their analysis:
- Plan sponsors should review plan and SPD provisions governing beneficiary designations to ensure that the designation procedures and other rules are clearly communicated
- Plan sponsors should consider adding or updating provisions addressing what happens to beneficiary designations upon divorce, and provisions for a qualified disclaimer.
Unanimous decision can create a lot of work.
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