Groups Urge Supreme Court to Uphold QDRO Ruling

July 17, 2008 (PLANSPONSOR.com) - In a motion for permission to file a friend of the court brief, the American Benefits Council, The ERISA Industry Committee (ERIC), and the National Association of Manufacturers (NAM) asked the U.S. Supreme Court to affirm a finding by the 5th U.S. Circuit Court of Appeals that a divorce decree was not a waiver of an ex-spouse's right to benefits.

In February, the high court agreed to hear the case in which the 5 ^th Circuit found that a qualified domestic relations order (QDRO) as provided for in the Employee Retirement Income Security Act (ERISA) is the only valid way a divorced spouse can waive his or her right to the ex-spouse's pension benefits (See Supreme Court to Decide Issue of Ex-spouse Waiver of Benefits ). The groups said a decision to "recognize beneficiary waivers that are not contemplated in the applicable plan documentation would wreak havoc on plan administration."

In their brief, the groups argued that requiring plan administrators to recognize waivers based on federal common law would undermine ERISA's requirement that benefits be paid to beneficiaries in accordance with terms of a plan's document. Such a "rule would also impose enormous burdens and costs on plans and their participants and give rise to costly disputes, litigation, and the possibility of double payment of plan benefits," they contended.

The groups said they filed the brief over concern that a reversal of the 5 ^th Circuit's finding could discourage employers from maintaining a retirement plan. The brief is here .

The case concerns former E.I. DuPont De Nemours & Company employee William Patrick Kennedy who participated in the DuPont Savings and Investment Plan (SIP). Pursuant to ERISA, the SIP provided that "no assignment of the rights or interests of account holders under this Plan will be permitted or recognized" Liv Kennedy was William's spouse and was his designated beneficiary under the plan.

Liv and William divorced in 1994, and in the divorce decree Liv agreed to be divested of "all right, title, interest, and claim in and to ... the proceeds therefrom, and any other rights related to any ... retirement plan, pension plan, or like benefit program existing by reason of [William's] employment". In 1997, an ERISA QDRO was approved, but it provided benefit-disbursement instructions for some of William's non-SIP employee-benefit plans. No QDRO for the SIP benefits was ever submitted.

When William died in 2001, his estate requested his SIP benefits, claiming that Liv waived her right to benefits per Texas state law in the divorce decree. DuPont refused the estate's request and paid benefits to Liv.

Rebecca Moore
editors@plansponsor.com