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Plan Document Rule

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Supreme Court Upholds “Plan Document” Rule.  Resolving a split between the federal circuit courts, the United States Supreme Court upheld the so-called “plan document” rule in finding that plan administrators must pay benefits under an ERISA plan according to the beneficiary designation on file with them.  In this case, the ex-spouse had purportedly waived her rights to her ex-husband’s 401-k in a divorce agreement that was subsequently incorporated in a judgment.  The ex-husband died, having neglected to change the beneficiary designation; consequently, the ex-wife was still designated as the beneficiary on the plan document at the time of his death.   The plan administrators, relying on that designation, paid the benefits to the ex-wife and the executrix of the ex-husband’s estate sued, alleging that the ex-wife had no rights to the benefits as a result of the divorce judgment.  The executrix, however, may not be out of remedies as the decision does not make clear whether the estate would have a cause of action against the ex-wife for breach of the divorce agreement.  The case law on this issue, too, is divided – with some courts allowing a breach of contract action in these circumstances and others holding that ERISA preempts (i.e. does not permit) such actions.  Kennedy v. Plan Adm’r for DuPont Sav. and Inv. Plan, 129 S.Ct. 865 (January 26, 2009)