A Plan's Gotta' Do What a Plan's Gotta' Do!
When is a waiver not a waiver? The United States Supreme Court's decision in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan (1/26/2009) addresses a claim that an ex-spouse waived her interest in a deceased employee's pension plan account. The central issue was whether the plan administrator could "interpret" the actions of the party to find a waiver.
William Kennedy divorced Liv Kennedy and in the divorce settlement, Liv wived any right to receive payment from the DuPont plan. However, William did not change his beneficiary designation and Liv remained the sole named beneficiary on his account. When he died, his daughter, Kari Kennedy became the administrator of his estate and asked the plan to make a distribution. The plan, in accordance with the designation, made the distribution to Liv and the estate sued the Plan Administrator.
The Court affirmed that ERISA provides no exception to the plan administrator's duties to act in accordance with the plan documents. By giving the plan participant's a clear set of instructions for making his wishes known, ERISA requires the administrator to be bound by those wishes. There is no ability for the plan administrator to seek to diving expressions of intent. This would give rise to less certain rules of administration and potentially give rise to claims of misinterpretation of intent. Therefore, the only option for the plan administrator was to abide by the beneficiary designation and affirmed the lower court decision that the distribution to Liv was correct.
The Court commented that this decision points out "the wisdom of protecting the plan documents rule" which generally holds that the plan administrator is safe as long as it abides by the terms and requirements of the plan. So in the end, a waiver is only a waiver if it meets the requirements of a plan. At the point at which a plan administrator is asked to interpret the intention of the parties in the absence of compliance with plan requirements, it loses the protection of the rule. Thus, a plan's gotta' do what it is required to do under its terms.
