Alienation of ERISA Governed Benefits

I’ve had an interesting collection of educational materials and seminars piling up on my desk for awhile now, a number of which may be of interest to various readers of this blog. In the hope of both clearing up that backlog and passing along useful information, I am going to start a short series of - or maybe a series of short - blog posts on them, until they are exhausted. I expect I won’t run through them all seriatim, as I suspect breaking news or new court decisions will interpose themselves, but we will see.

The first one I wanted to pass along is something you can blame the Workplace Prof for, whom I have fingered in the past as the filter I use to screen law review articles and decide which ones might be worth reading. Some of you know from past posts that I don’t put a lot of stock in most law review publications, but some fit my criteria for being useful, which revolves heavily around whether they break any new ground in an area or manner that makes them useful to courts and practitioners. This one here, a 142 page analysis of when ERISA governed benefits can be transferred to anyone other than the participant or the participant’s selected beneficiary, fits this criteria to a tee. The Workplace Prof passed along the abstract of the article a little while back, which is:

This Article argues that a beneficiary designation made by a participant pursuant to the terms of an ERISA plan determines who is entitled to survivor benefits from that plan. Such designation may not be superseded by

(A) an agreement made in a marital dissolution or separation whereby a participant promises to make or retain a different designation (such agreements are not qualified domestic relations orders, "QDROs," because QDROs are limited to orders directed not at participants but at ERISA plans);

(B) an agreement made in a marital dissolution or separation whereby a participant's former or separated spouse "relinquishes" any interest in the participant's ERISA plan benefits; or 

(c) a state law or federal common-law principle whereby killers of a participant are deprived of the entitlement to the participant's survivor benefits from an ERISA plan.

ERISA pension plans must incorporate the only two ERISA required beneficiary designations, QDROs and spousal survivor benefit designations. Neither statutory designation applies to an ERISA plan that is not a pension plan, such as a life insurance or disability plan. Thus, neither statutory designation may supersede a beneficiary designation made pursuant to the explicit terms of an ERISA life insurance or disability plan.

ERISA voids both (A) a direct benefit claim against an ERISA plan that is not based on a designation that was made pursuant to the terms of the plan, and (B) an indirect benefit claim against the recipient of plan benefits that is not based on a designation that was made pursuant to the terms of the plan.

What jumped out at me from the article itself is the author’s discussion of the application and impact of Qualified Domestic Relations Orders (known in common parlance as QDROs), which can supercede a participant’s designation of the party to whom plan benefits should be paid. The author gives QDROs a far narrower scope of application and power under ERISA than it appears to me courts have been giving to them, and in fact his position on their impact runs counter to what appears to me to be the trend at the trial level in the federal system in applying QDROs. He makes a fascinating and well-supported argument, although at this point, I reserve judgment on the ultimate issue he raises, of exactly how QDROs should be understood under ERISA. At a minimum, however, for anyone arguing the point in a case, there is a wealth of information in the article, as well as support for arguments that a party might make in court over that issue.