In an unanimous opinion, the United States Supreme Court recently ruled that an ERISA plan administrator must follow a deceased participant’s beneficiary designation even where the beneficiary (in this case the decedent’s former spouse) validly waived her rights to an ERISA savings and investment plan under federal common law pursuant to a divorce decree years earlier. Kennedy v. Plan Adm’r for DuPont Savings & Inv. Plan (U.S. 2009). The decision has attracted significant attention from employment and family law communities because of its potential impact on 300,000 to 400,000 divorcing workers each year and their heirs, beneficiaries, and families.

While employed by DuPont, William Kennedy named his wife, Liv, as the sole beneficiary of his employer-sponsored savings and investment plan (“SIP”). When the couple divorced, Liv Kennedy voluntarily waived her right to receive benefits under the SIP plan as part of their property settlement. However, William Kennedy never removed his ex-wife’s name from the beneficiary form on file with DuPont. At the time of William Kennedy’s death over seven years later, DuPont disbursed $402,000 in SIP benefits to his ex-wife as the designated beneficiary.

William Kennedy’s Estate sued DuPont and the ERISA plan administrator (collectively “DuPont”) alleging that Liv Kennedy waived her SIP benefits in the divorce and that DuPont had violated the Employee Retirement Income Security Act (“ERISA”) by paying her. The District Court entered summary judgment in favor of the Estate and ordered DuPont to pay the benefits to the Estate. The Fifth Circuit Court of Appeals reversed, holding that because Liv Kennedy’s waiver in the divorce decree was not a Qualified Domestic Relations Order (“QDRO”), the waiver ran afoul of ERISA’s “anti-alienation provision,” which requires pension benefit plans to provide that benefits may not be assigned or alienated. A QDRO is an exception to ERISA anti-alienation provisions and permits a divorcing spouse to waive pension benefits in a marital dissolution context.

The Supreme Court determined that Liv Kennedy’s waiver under the terms of the couple’s divorce decree did not constitute an assignment or alienation, and, therefore, did not invoke ERISA’s anti-alienation provision. Nonetheless, Liv Kennedy’s waiver did not control the outcome. The Court held that ERISA provides no exception to a plan administrator’s duty to act in accordance with plan documents. In Kennedy, the plan documents provided for DuPont to pay benefits to a participant’s designated beneficiary and specified the manner in which beneficiary designations and changes were to be made. William Kennedy’s designation of his ex-wife as beneficiary was made in the way required under the plan; Liv Kennedy’s waiver was not. Accordingly, DuPont properly distributed the plan benefits to Liv Kennedy.

In practice, this case demonstrates the critical considerations that arise when ERISA plan participants designate beneficiaries or modify beneficiaries in divorce proceedings. Under Kennedy, should a plan participant divorce, the safest way to ensure that benefits will be distributed in accordance with the party’s intent is for the plan participant to update his or her beneficiary designation forms in accordance with the governing plan documents.

*Ms. Orr is a law clerk at Larkin Hoffman Law Firm.