Is a Qualified Domestic Relations Order provision the only valid way a divorcing spouse can waive her right to receive her ex-husband's pension benefits under ERISA?

That's the question the Supreme Court agreed to consider when it accepted Kennedy v. Plan Adm. for DuPont Savings earlier this year. However, during yesterday's oral arguments on the case, it appeared that the justices may well go beyond this narrow topic and address the larger question of whether plan documents are indeed the final legal word on beneficiary status.

"It was very telling that the justices spent half their time yesterday talking about the plan document rule rather than the QDRO question that they granted certiorari on," says Carrie Byrnes, an attorney with Bryan Cave LLP in Chicago. "The bigger issue they seem to be struggling with is whether the Fifth Circuit court made the right decision using the wrong reasoning, and whether we should be talking about the beneficiary designation."

In Kennedy v. DuPont, Kari Kennedy, the daughter of William Kennedy, a DuPont employee, sued the company to recover $400,000 in retirement benefits that were paid upon his death to his ex-wife, Liv. Liv had waived her rights to William's pension in their divorce decree, but had never filed a QDRO with the company. Nor had William removed her as the beneficiary of the plan.

The district court agreed with Kari that her father's estate was entitled to the pension funds. It cited federal common law, saying that Liv's waiver of her rights to the pension in the divorce decree was valid. However, the United States Court of Appeals for the Fifth Circuit reversed the ruling, holding that federal common law is trumped by ERISA's anti-alienation provision, which prevents beneficiaries from transferring their pension plan benefits, including transfers through domestic relations orders, including divorce decrees.

If the Supreme Court upholds the appellate decision, it will make QDROs the only method by which an ex-spouse can waive rights to pension plan benefits. A reversal would permit voluntary non-qualified waivers as well.

"I think the court will affirm the Fifth Circuit's decision that a QDRO is the only way to assign benefits," predicts Bryne. "But if they do get into the plan documents issue, I think they will say that the plan document rule should be upheld, and a fiduciary need only to look at the plan document when deciding who to grant benefits to."

That affirmation would be welcomed by plan fiduciaries, she says. "From a plan administration standpoint, it doesn't make sense to put the burden on the [employer] to investigate [beneficiary status]," she says.

You can read more on Kennedy v. DuPont in the bulletin published by Cornell Law School's Legal Information Institute and at Scotuswiki.