209 / 507
Chapter 4: Inherited Benefits: Advising Executors and Beneficiaries
209
....” Emphasis added. The plan involved in Kennedy had a specific provision permitting disclaimer,
which the court quoted favorably. Kennedy should put an end to any notion that a disclaimer
violates ERISA’s anti-alienation requirement.
B.
Disclaimers and the plan document.
Another ERISA requirement applicable to QRPs is
that the plan administrator must administer the plan in accordance with “the terms of the
plan.” 29 U.S.C. § 1132(a)(1)(B). The Supreme Court has twice held that this ERISA rule
preempts any state law that would require the plan administrator to deviate from the terms
of the plan document:
1.
In
Egelhoff v. Egelhoff,
532 U.S. 141 (2001), the named beneficiary under the plan
was (as in Kennedy) the participant’s ex-spouse. Under Washington state law,
which otherwise applied to these individuals, the designation of the participant’s
spouse as beneficiary would have been automatically revoked by their divorce. Had
Washington state law been applied to the QRP benefits in question, the former
spouse would have been treated as having predeceased the participant. The Court
ruled that the Washington state law was preempted by ERISA; the ex-wife, as the
named beneficiary under the plan, was still entitled to the benefits because nothing
in the plan documents said that divorce revoked her rights as named beneficiary.
2.
In
Boggs vs. Boggs,
520 U.S. 833 (1997), the Court held that a state’s community
property law purporting to grant the participant’s spouse the right to transfer part
of the participant’s plan benefits was preempted by ERISA because the right, as in
Egelhoff, would require the plan administrator to look beyond the plan documents
to determine who was entitled to the benefits.
These holdings would appear to “overrule” PLR 8908063, in which the IRS ruled that a
plan must conform to a state’s “slayer” statute, and not pay benefits to the person who murdered
the participant, even if that person is named as beneficiary under the plan.
In Kennedy (see “A” above), there was a conflict between the participant’s divorce
agreement (under which the participant’s ex-wife Liv had waived her rights to the benefits) and
the written beneficiary designation form on file with the plan (under which Liv was the named
beneficiary). The Court viewed the divorce agreement as a valid “federal common law waiver” of
the benefits by Liv, but held that a federal common law waiver, like a state law revoking a
beneficiary designation in case of divorce, would have to give way to the superior rule that the
plan administrator must carry out the terms of the plan document.
The point of this rule, the Court explains in Kennedy, is to avoid forcing “plan
administrators to examine numerous external documents purporting to be waivers and draw them
into litigation like this over those waivers’ meaning and enforceability.” The Kennedy Court
reiterates the importance of “holding the line” “in holding that ERISA preempted state laws that
could blur the bright-line requirement to follow plan documents in distributing benefits.” ERISA
and the Court favor “a uniform administrative scheme, [with] a set of standard procedures to guide
processing of claims ....”
The Kennedy case leads to the following conclusion: A plan may choose to recognize
disclaimers—or not. If the plan document specifies that disclaimers are not recognized, then the
plan administrator cannot honor a disclaimer, regardless of state law.