Kennedy v. Plan Administrator for DuPont Savings and Investment Plan
Filed January 26, 2009
Cite as No. 07-636

Divorced Wife’s Right to Receive ERISA Benefits Upheld

William P. Kennedy was an employee at Dupont and a member of its savings and investment plan (SIP). In 1974, William Kennedy signed a beneficiary-designation form authorizing Liv Kennedy, his wife at the time, as the SIP’s sole beneficiary. The two divorced in 1994.

Pursuant to the divorce decree, Liv Kennedy agreed to forfeit “all right, title, interest, and claim” to William Kennedy’s plan assets. In addition to Liv Kennedy’s divorce waiver, the divorce court also approved a “qualified domestic relations order” {QDRO) to disburse William Kennedy’s assets held in non-SIP employment benefit plans, as well as some SIP assets not in dispute in this case.

A "qualified domestic relations order" is an order that needs to be included in a divorce agreement when dealing with pension funds. The QDRO establishes your soon-to-be-ex-spouse's legal right to receive a designated percentage of your qualified plan account balance or benefit payments.

However, in this case, a separate QDRO was never submitted for the remaining SIP assets, and William Kennedy never replaced Liv Kennedy as the SIP’s sole beneficiary.

After William Kennedy died in 2001, his assets from the SIP plan were distributed to Liv Kennedy pursuant to her designation as the plan’s beneficiary. Kari Kennedy, the daughter of William Kennedy and the executor of his estate, asked Liv Kennedy to relinquish her rights to the SIP assets.

When she refused, the estate filed suit against Dupont, based on the following allegations:

• that Liv Kennedy waived her rights to the SIP assets through the previous divorce decree


• that Dupont had thus incorrectly distributed the plan benefits

The U.S. District Court for the Eastern District of Texas granted summary judgment for the estate, holding that federal common law allows an ERISA beneficiary to waive his or her rights to plan assets “provided that the waiver is explicit, voluntary, and made in good faith.” The court also found that Liv Kennedy’s waiver of benefits met this test.

Further, the court also held that an ex-spouse’s waiver of benefits does not amount to an assignment or alienation and thus does not violate ERISA’s anti-alienation provision.

During appeal, the Fifth Circuit reversed the order, holding that the federal common law waiver approach was “in tension” with the “detailed, careful and comprehensive QDRO scheme” outlined by ERISA, which provides a specific statutory scheme for addressing a spouse’s interest in plan benefits. Accordingly, when the QDRO mechanism is not invoked, “there is no basis to formulate a federal common law rule.”

Furthermore, the court noted, requiring Dupont to recognize the divorce decree as a waiver would determine rights to plan assets in a manner not authorized by the QDRO provision and would thus conflict with ERISA’s anti-alienation requirement.

The Supreme Court settled two issues of workers’ benefits law, namely:

• that a former spouse can give up the right to benefits by agreeing to do so as part of a divorce decree


• that the ultimate question of whether the ex-spouse was entitled to the benefits is to be decided by the specific terms of the plan — in short, what the documents say.

The Supreme Court therefore ruled that ERISA provides no exception to a plan administrator’s duty to act in accordance with plan documents because wife never attempted to direct her interest to any other potential beneficiary and the decedent did not execute a document, which removes wife as beneficiary. The plan administrator was therefore obligated to act in accordance with plan documents and issue payment to wife.