It is a problem that ERISA causes family-law and estate practitioners. A person participates in an employee pension plan, and has designated her spouse as beneficiary. There is a divorce, and the spouse waives any claim to the pension as part of the property settlement, but no Qualified Domestic Relations Order (QDRO) is ever issued. To add insult to injury, the plan participant never bothers to change the beneficiary designation. Plan participant later dies, and the  retirement plan administrator pays the death benefit to the ex-spouse.

It has well established that the plan administrator is obligated to follow the plan documents, and must pay the death benefit to the ex-spouse, despite her waiver. Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285, 129 S.Ct. 865, 172 L.Ed.2d 662 (2009). Kennedy held that the estate of the plan participant cannot sue the plan administrator to require payment to the estate. The rationale behind this is that ERISA is supposed to make things as simple as possible for administrators; if they have to determine whether documents outside the plan (like a waiver by an ex-spouse) might affect its obligations under the plan, the administrator’s job gets harder, the plan becomes more expensive to operate, and employers might be less likely to establish or maintain them.

Kennedy expressly noted that its decision did not address the question whether an estate or new spouse could sue the ex-spouse after he received the death benefit he had waived. In a March 20, 2012 decision, the Third Circuit has confirmed that such a claim is not barred by ERISA. Estate of Kensinger v. URL Pharma, Inc., 2012 WL 917582 (3d Cir. Mar. 20, 2012) (“to the extent that ERISA is concerned with the expeditious payment of plan proceeds to beneficiaries, permitting suits against beneficiaries after benefits have been paid does not implicate any concern of expeditious payment or undermine any core objective of ERISA”).

Kensinger was a case of first impression in the Third Circuit, and appears to be the first case by any Circuit Court to confirm that ERISA does not preclude enforcing a benefit waiver after the benefit has been distributed. Kensinger collected cases from three state appellate courts that had considered the same question, noting that each of them had agreed that an estate may enforce a common law waiver against a designated beneficiary once pension funds have been distributed. See Sweebe v. Sweebe, 474 Mich. 151, 712 N.W.2d 708 (Mich.2006); Pardee v. Pardee, 112 P.3d 308 (Okla.Civ.App.2004); Alcorn v. Appleton, 308 Ga.App. 663, 708 S.E.2d 390 (Ga.Ct.App.2011).

Kensinger should help minimize Kennedy’s “somewhat odd result … that a plan administrator must adhere to the plan documents and distribute plan proceeds to the named beneficiary even though that beneficiary had affirmatively waived any claim to those funds.” Kensinger, 2012 WL 917582 at 3.