As mentioned in our July 1st client alert, the Supreme Court's Windsor decision presents 401(k) and other pension plans with immediate issues concerning the distribution of death benefits in circumstances involving same-sex spouses. Is an ERISA-compliant spousal consent required in order to pay benefits to a non-spouse beneficiary? That was the central question for a Pennsylvania federal court in a pension plan's interpleader action that was decided on July 29th. In Cozen O'Connor v. Tobits, the court awarded benefits to the same-sex partner (rather than the deceased employee's parents) on the ground that --
Post-Windsor, where a state recognizes a party as a “Surviving Spouse,” the federal government must do the same with respect to ERISA benefits — at least pursuant to the express language of the ERISA-qualified Plan at issue here.
The underlying profit sharing plan defined the term "Spouse" merely by reference to "the person to whom the Participant has been married." In the case at hand, there was no question that a valid same-sex marriage had occurred in both Canada and Illinois.
Regarding ERISA's spousal consent rule for waivers of pension benefits, the court stated in footnote 5 of its opinion:
Because there is no debate that Ms. Tobits did not waive her right to be Ms. Farley’s Beneficiary, a determination of whether Ms. Tobits is Ms. Farley’s “surviving Spouse” pursuant to the Plan is dispositive of the distribution of death benefits.
Pension plans will be smart to alert participants to the impact of Windsor decision on their beneficiary designations, as well as to consider clarifying plan amendments. Those actions should reduce the risk of future litigation such as the one described above.