From time to time over the past decade, the federal courts have been called upon to settle competing claims under welfare and pension benefit plans where the plan terms are at odds with some other purportedly controlling document. By way of example, an employee might get a divorce and remarry but neglect to change beneficiaries under his or her employer’s group life insurance plan. Further, the divorce decree might explicitly recognize the employee’s right to change his or her beneficiary. Upon the employee’s subsequent death, the exspouse and the current spouse will both claim the insurance proceeds.

Similar issues arise where retirement benefits are concerned, although the rules differ slightly. Both the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code contain provisions requiring plans to follow the orders of state courts overseeing domestic disputes that meet certain requirements. These orders are referred to as “qualified domestic relations orders” (QDROs).

Until recently, the federal courts have failed to adopt a reliable and uniform set of rules for adjudicating disputes among beneficiaries with competing claims. Some courts, adopting a strict reading of ERISA, simply pay the benefit based on the express terms of the plan; while others, with a nod to such concepts of “federal common law,” look to documents extraneous to the plan (e.g., the divorce decree, a waiver, or some other document) to make the call. In Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, the U.S. Supreme Court settled the matter, coming down squarely on the side of the plan document.

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