U.S. Supreme Court Turns Away Survivor Designation Case

January 18, 2007 (PLANSPONSOR.com) - The U.S. Supreme Court has turned down a request to hear a case in which an appellate court decided a retiree could not change his surviving spouse designation even after the spouse he initially designated signed a waiver of benefits in their divorce settlement.

The court turned away the case without comment, except to note Justice Samuel Alito was not involved in considering the matter, according to Supreme Court documents .

The matter presented to the high court concerned a  September 2005 ruling by the 3 rd U.S. Circuit Court of Appeals in a lawsuit by James McGowan against his employer NJR Service Corp.   The appellate court ruled that a lower federal court judge was right in asserting NJR should not be forced to change McGowan’s retirement plan survivor designation from a second wife to his first wife after the second had   agreed to waive her interest in the assets (See Court Denies Ex-Wife’s Waiver of Benefits).

Upon his retirement in November 1996, McGowan   elected to receive his retirement benefits in the form of an automatic surviving spouse option creating a 50% survivor annuity for the second wife. This election remained in effect when he began receiving benefits in 1996.

The plan turned down McGowan’s request to change the survivor designation from the second wife to the first wife because plan documents did not allow such a change when payments had begun, according to court documents.

Notwithstanding the fact the plan refused to change the designation from the second wife to the first, McGowan sought to change beneficiaries again after his marriage to a third wife in November 2001. That request was also refused.

In the 3 rd Circuit ruling, Circuit Judge Franklin Van Antwerpen said that plan administrators’ duty under the Employee Retirement Income Security Act (ERISA) is to run the plan “in accordance with the documents and instruments governing the plan.”  Van Antwerpen said the administrators could not look beyond plan documents to determine if a spouse had waived his or her right to survivor benefits.

Van Antwerpen also said McGowan was attempting to use the waiver as a “functional equivalent of an assignment of benefits.”