Facts: William Kennedy participated in his employers savings and investment plan (SIP), a plan that was governed by ERISA. Under the SIP, William had the power to both designate, and revoke the appointment of a beneficiary to receive the funds upon his death. Under the plans terms, if no beneficiary was designated, the funds are distributed in accordance with the direction of the executor of the decedent’s estate. Upon William’s marriage to Liv, he designated her as the beneficiary of the plan and did not name a contingent beneficiary. Upon their divorce, Liv signed a general waiver divesting her interests in the SIP but did not secure a Qualified Domestic Relations Order (QDRO)(a court order that satisfies certain statutory guidelines and would have allowed Liv to bypass the anti-alienation clause of ERISA.) Upon Williams’ death, Kari William’s daughter and the executrix of his estate, requested that DuPont distribute the funds to his estate. DuPont however, disbursed the funds to Liv, relying on the original documents that named her as the beneficiary. Kari brought suit against DuPont and the plan administrator claiming that they had violated ERISA.
Procedural Posture: The District court entered summary judgment for the estate and ordered the plan administrator to pay the benefits to the estate. The Fifth Circuit reversed, holding that the general waiver was a violation of ERISA’s anti-alienation clause and was thus invalid.
Issue: Is a general waiver of all rights and interests, sufficient to waive rights and interests of a beneficiary under an ERISA plan?
Holding: No it is insufficient. In order to waive beneficiary status the ERISA documents themselves must reflect the change.
Rationale: The Supreme Court relied on the Plan Documents Rule. Essentially, the notion that ERISA is governed by the terms of its plan and there is no requirement that an administrator look to external documents or other external evidence in order to carry out his ERISA obligations. The Supreme Court based its ruling on the following considerations:
- It establishes a uniform administrative scheme that is uncomplicated
- Otherwise, administrators would be forced to look to a multitude of external documents and the disbursement of funds would be affected
- Precedent from its rulings regarding preemption of State law, where the SC held a bright line rule and maintained that State Law that would have blurred the Plan Documents Rule was preempted. (Boggs v. Boggs and Egelhoff v. Egelhoff)