The U.S. Supreme Court has agreed to review the question of whether a qualified domestic relations order (QDRO) is the only valid way under ERISA that a former spouse can waive his or her right to receive a death benefit from an employee pension benefit plan. Kennedy v. DuPont Plan Administrator (07-636)
The lower court decision in Kennedy focused on a former spouse’s right to receive benefits as a beneficiary under the DuPont employee savings plan. The plan participant designated his then-wife as the sole beneficiary under the savings plan. Several years later, when the participant and his wife divorced, the divorce decree specified that the wife agreed to be divested of her rights under her former spouse’s retirement plans. A QDRO providing disbursement instructions for the participant’s benefits under various DuPont employee benefit plans was issued; however, the QDRO did not apply to the savings plan. In addition, the participant did not complete a new beneficiary designation for the savings plan after the divorce.
Upon the participant’s death, his estate sought to invalidate the participant’s designation of his former spouse as the sole beneficiary under the savings plan, citing a Texas state law that invalided a spouse’s designation as a retirement plan beneficiary upon divorce. The DuPont plan administrator refused to apply the Texas law and distributed the account balance to the former spouse pursuant to the beneficiary designation.
The estate filed suit in federal district court under ERISA section 502(a)(1), asserting that the former spouse waived her right to the savings plan account balance by executing the divorce decree. The district court held that, under federal common law, the divorce decree constituted a valid waiver of the former spouse’s rights under the savings plan and granted summary judgment to the estate. DuPont appealed the ruling to the Fifth Circuit of the U.S. Court of Appeals.
Upon review, the Fifth Circuit court held that the savings plan account was properly distributed to the former spouse. The court held that the federal common law was displaced in this case by ERISA’s anti-alienation provision (section 206(d)(1)), which prohibits the assignment or alienation of benefits held in a qualified pension plan, and that ERISA’s QDRO provisions supply the sole exception to the anti-alienation provision in the context of the dissolution of a marriage. Since the divorce decree did not qualify as a QDRO, DuPont was not required to recognize it as a “waiver” of the former spouse’s rights under the plan, and the DuPont plan administrator was bound to follow the participant’s valid beneficiary designation.
Although the estate requested a writ of certiorari on several issues raised at the lower court level, the only issue being taken up by the Supreme Court is the question of whether a QDRO is the sole exception to ERISA’s anti-alienation provision. In granting certiorari on the QDRO issue, it appears that the court intends to clarify whether plan sponsors are required to consider documents other than QDROs in determining a beneficiary’s right to benefits under the plan, a decision that would add to the growing body of Supreme Court precedent regarding participant rights under ERISA.