In Andochick v. Byrd, 709 F.3d 296 (4th Cor., 2013), the Fourth Circuit recently held that ERISA does not preempt a lawsuit against a former spouse of a decedent that waived benefits under an ERISA-governed plan. Plaintiff Scott Andochick asserted that ERISA preempted a state court's order that required him to turn over the benefits received under ERISA-governed plans that had been owned by Andochick's deceased ex-wife, Erika Byrd.
During Andochick and Byrd's marriage, Byrd participated in her employer's ERISA-governed 401(k) Plan and Life Insurance Plan (the "Plans"), and Andochick was the named beneficiary. Later, Andochick and Byrd divorced and entered into a marital settlement agreement. In the settlement agreement, Andochick "waive[d] any interest, including but not limited to any survivor benefits, which he may have" in the Plans. Andochick also agreed to sign any document necessary to effectuate the waiver. Byrd subsequently died, and her parents became the administrators of her estate. Despite Andochick waiving any benefits from the Plans, Byrd never named a new beneficiary for either Plan. Accordingly, the administrator of the Plans determined that the proceeds of both Plans should be paid to Andochick, because Andochick remained the named beneficiary of the Plans.
The Fourth Circuit noted that ERISA directs the Plans' administrators to discharge their duties in accordance with the documents that govern the Plan (including the terms of any beneficiary designations), as was decided in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 555 U.S. 285 (2009). In other words, the administrators of the Plans were obligated to pay benefits to Andochick even though he had waived benefits in the marital settlement agreement. Kennedy never addressed whether a decedent's estate could then enforce a waiver against the beneficiary. Andochick argued that ERISA preempts the waivers embodied in the marital settlement agreement. The Fourth Circuit disagreed, finding that "[a]llowing post-distribution suits to enforce state-law waivers does nothing to interfere" with the core objectives of ERISA. Therefore, the Fourth Circuit determined that Andochick should be paid the benefits from the Plans, but that the decedent's estate could seek to recoup those benefit by enforcing the marital settlement agreement in state court.
Andochick reinforces the need to insure that beneficiary designations are reviewed and updated to conform with changes in marital status. All too often, individuals enter into prenuptial, antenuptial, divorce and other settlement agreements with their spouses that relate to benefits under ERISA-governed plans and fail to review the beneficiary designations under those plans resulting in a conflict between the settlement agreement and the beneficiary designation.