In 2009, plan administrators generally applauded a decision by the U.S. Supreme Court holding that ERISA requires distribution of benefits to the named beneficiary in an ERISA plan, regardless of any state law waiver purporting to divest that beneficiary of his or her right to the benefits. In reaching this decision, the Court in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan focused on three key objectives of ERISA: (1) simple administration, (2) avoiding double liability for plan administrators, and (3) ensuring that beneficiaries get their benefits quickly. Addressing an issue that the Supreme Court had explicitly left unanswered in the earlier case, the U.S. Court of Appeals for the Fourth Circuit recently ruled that ERISA does not, however, prohibit a state court from enforcing a former spouse’s waiver of his interest in his ex-wife’s ERISA plan benefits after benefits have been distributed.

As so often happens, the ex-wife in this case neglected to change the beneficiary designations for her 401(k) and life insurance plans following her divorce, even though her ex-husband had executed a waiver of his rights under the plans. On the participant’s death in 2011, the ex-husband was still the named beneficiary of the participant’s ERISA benefits. Consequently, the plan administrators of both plans correctly determined that the benefits should be paid to the ex-husband. The participant’s parents appealed the administrators’ decisions and filed suit directly against the ex-husband for breach of his marital settlement agreement. The ex-husband countered with an action asserting that ERISA preempted the waiver provisions in the settlement agreement. Litigation ensued, eventually resulting in the Fourth Circuit’s affirmation of a lower court decision dismissing the ERISA preemption claim and holding that, although the plan administrators must distribute benefits to the ex-husband as named beneficiary, the ex-husband must then waive his rights to the funds following that distribution and turn the funds over to his ex-wife’s estate. Noting that “allowing post-distribution suits to enforce state-law waivers” does not interfere with the objectives of ERISA, the appeals court found that ERISA does not preempt post-distribution suits against beneficiaries. (Andochick v. Byrd, 4th Cir. 2012)