U.S. Supreme Court says ex-wife gets pension benefits
Unanimous U.S. Supreme Court holds ex-wife entitled to pension benefits
In a follow-up to a previous post concerning a dispute between an ex-wife and her daughter over the ex-husband's pension benefits, the U.S. Supreme Court issued a unanimous opinion upholding the Fifth Circuit Court of Appeals' decision giving the benefits to the ex-wife. However, the U.S. Supreme Court disagreed with the Fifth Circuit reasoning and affirmed the ruling on other grounds.
To recap the facts, Mr. Kennedy was an employee of DuPont and participated in their savings and investment plan (SIP) that was an ERISA benefit plan. In 1971, Mr. Kennedy married and three years later signed a beneficiary designation identifying his new wife, Liv Kennedy, as the sole beneficiary of the SIP plan. Twenty years later, the couple divorced. As part of the divorce, the ex-wife agreed to relinquish all rights to husband’s pension benefits with DuPont. The agreement to waive those benefit was contained in the divorce decree. However, a Qualified Domestic Relations Order was not submitted covering these benefits nor did the husband ever change the beneficiary designation for the account.
In 1998, Mr. Kennedy retired from DuPont and later died in 2001. His daughter was appointed administrator of his estate. She sent a letter to DuPont requesting the Estate be paid the funds in the SIP. DuPont refused, stating that the beneficiary designation identified the ex-wife as the beneficiary. She also asked the ex-wife (her Mom) to relinquish her rights to the account and she refused. In fact, ex-wife asked DuPont to pay up and they sent the ex-wife the $400,000.00. Daughter, on behalf of the Estate, brought a lawsuit.
The District Court sided with the Estate and ordered DuPont to pay the funds to the Estate as opposed to the ex-wife. The ex-wife appealed to the Fifth Circuit Court of Appeals which reversed the district court and said the funds should be paid to the ex-wife. The Fifth Circuit said the divorce decree was not a Qualified Domestic Relations Order (QDRO) and a QDRO was the mechanism which needed to be used "for addressing the elimination of a spouse's interest in plan benefits."
The United States Supreme Court agreed with the Fifth Circuit's holding, but disagreed with its reasoning. In short, the U.S. Supreme Court said that a QDRO was not needed to eliminate a person's right to a benefit plan. Rather, the key was the beneficiary designation form and the procedures set up under the plan. The plan set up a procedure for the husband to designate a new beneficiary and he did not. The plan also set up a procedure for the ex-wife to waive her right to benefits, and she did not. Therefore, the employer had to pay the benefits as stated in the original beneficiary designation form no matter what the divorce decree stated. Thus, ex-wife gets the benefits and daughter does not.
What is the lesson learned? If you divorce, you must ensure that your designated beneficiary forms under any pension and/or retirement plan covered by ERISA are changed. You must make the change yourself following the rules given by your employer. Do not rely on a waiver of benefits in a divorce decree or QDRO. Change the beneficiary form or it could result in unintended consequences at your death--your ex-spouse getting your benefits. As a post-script to the case, court documents show the ex-wife, who got a little more than $400,000 in pension benefits, spent all of it and died in 2007.
At the Kisselburgh Law Firm, we represent those going through a divorce. If you would like to discuss your case, contact us online or call at 601-936-4040 to set up a consultation.
