Kennedy v. Plan Administrator for DuPont Sav. and Investment Plan

PETITIONER: Kari E. Kennedy, et al.
RESPONDENT: Plan Administrator for DuPont Savings and Investment Plan, et al.
LOCATION: E.I. DuPont de Nemours & Company

DOCKET NO.: 07-636
DECIDED BY: Roberts Court (2006-2009)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 555 US (2009)
GRANTED: Feb 19, 2008
ARGUED: Oct 07, 2008
DECIDED: Jan 26, 2009

ADVOCATES:
David A. Furlow - argued the cause for the petitioners
Leondra R. Kruger - Assistant to the Solicitor General, Department of Justice, for the United States, as amicus curiae
Mark Irving Levy - argued the cause for the respondents

Facts of the case

William Kennedy designated his wife, Liv, as the sole beneficiary of his Dupont pension and retirement savings plans. The couple subsequently divorced, and as part of the settlement Liv agreed to give up any interests she may have in the plans. However, William never submitted this portion of the settlement prior to his death in 2001, so the pension and retirement savings benefits were paid out to Liv. William's daughter, Keri, the executor of his estate, brought suit against Dupont to recover the benefits. The U.S. District Court for the Eastern District of Texas granted summary judgment for the estate, awarding it the value of the benefits.

The U.S. Court of Appeals for the Fifth Circuit reversed, explaining that because William had never submitted the portion of the settlement agreement denying the benefits to Liv, they were correctly paid out to her by Dupont.

Question

Does the Employee Retirement Income Security Act's anti-alienation provision prevent the enforcement of a waiver recognized by federal common law which holds that a spouse's right to the other spouse's pension benefits is rendered void upon divorce?

Media for Kennedy v. Plan Administrator for DuPont Sav. and Investment Plan

Audio Transcription for Oral Argument - October 07, 2008 in Kennedy v. Plan Administrator for DuPont Sav. and Investment Plan

Audio Transcription for Opinion Announcement - January 26, 2009 in Kennedy v. Plan Administrator for DuPont Sav. and Investment Plan

David H. Souter:

The second of the case as I have this morning is Kennedy and Plan Administrator for DuPont Savings, No. 07-636.

This case comes to us on a writ of certiorari to the United States Court of Appeals for the Fifth Circuit.

The decedent, William Kennedy, worked for DuPont and participated in its saving and investment plan governed by the Employee Retirement Income Security Act or ERISA.

The plan allows the participant to designate a beneficiary to receive funds upon -- upon the participant’s death as well as means for changing that designation.

If no beneficiary is designated, the benefits go to the decedent's estate.

William Kennedy designated his wife Liv as his beneficiary, but by the terms of a subsequent divorce decree, Liv waived her right to the plan benefits.

William did not, however changed his beneficiary designation form.

Upon William's death, the plan paid the benefits to Liv in accordance with William's designation.

The petitioner, Kari Kennedy, William's daughter and executrix, brought suit against DuPont and the Plan Administrator claiming that Liv's waiver meant that the Estate was entitled of the benefits.

The District Court granted summary judgment for the Estate, the Fifth Circuit reversed.

It held that Liv's waiver was barred by ERISA's anti-alienation provision which requires pension benefit plans to provide that plan benefits may not be assigned or alienated, a provision that the Fifth Circuit believed invalidated Liv's waiver.

The Court of Appeals emphasized that ERISA carves out an exception to the anti-alienation bar for a divorce decree that constitutes a qualified domestic-relations order or QDRO, but that the divorce decree here was not a QDRO and therefore, could not be honored.

In a unanimous opinion filed today with the clerk of court, we affirm but we do so and reasoning different from the Fifth Circuit's rationale.

Liv's waiver was not barred by ERISA's alienation provision.

It would be unusual to speak of Liv's waiver as an assignment or alienation since she did not control who would receive the benefits in her stead.

And we do not see how the Fifth Circuit's analysis can be squared with certain waivers that are plainly permissible.

For example, the spouse's ability to waive her right to survivor benefits or beneficiary is qualified disclaimer of benefits under the tax code.

Given these concerns, we looked to the common law of trust which informs our interpretation of ERISA.

The anti-alienation provision is similar to a spendthrift provision and a trust.

And while such a provision bars a beneficiary from assigning benefits, it permits a disclaimer of benefits so long as the disclaimer makes no attempt to designate who is to receive the benefits.

The same principle applies here and indeed the Treasury Department interprets its own regulation on the subject to permit a waiver as such Liv's so long as there is no attempt to direct the interests to another person and this interpretation is controlling here.

The QDRO provisions have no bearing on this question as they require a transfer would be made to an ultimate payee.

They do not provide a mechanism for a pure waiver and they, therefore, cannot be read to suggest that such a waiver by non-QDRO is barred.

Nevertheless, we hold that the plan administrator properly disbursed the benefits to Liv.

ERISA requires the administrators to manage ERISA plans in accordance with the documents and instruments governing them.

And that is precisely what the plan administrator did.

The plan documents rule allows employers to establish a uniformed administrative scheme and ensures that administrators do not have to wade through a sea of diverse non-plan documents making difficult determinations about the meaning and enforceability of those documents.

Requiring a plan administrator to enforce a waiver that did not conform to the plan documents would be counted to ERISA's statutory command and would lead to the very sorts of administrative problems that the plan documents rule is meant to avoid.