A recent federal appeals court case has concluded that the lower court incorrectly
relied on the plan’s administrative documents executed by the participant and his second wife to determine that she, and not the participant’s first wife, was his legal wife at the time of his death.
The plan participant, Wayne, moved to Mississippi from Washington in the early 1990’s without his then wife Cleta. He later married Lois in Mississippi. Wayne later retired and applied for joint and survivor annuity benefits from the plan. That election requires the plan to pay a monthly pension to the participant and a survivor benefit equal to 50% of the that monthly pension. On his pension application, Wayne identified himself as married and named Lois as his spouse. Wayne also attached his Mississippi marriage certificate memorializing his marriage to Lois. He also listed Lois as the beneficiary of any benefits which may be payable from the pension fund as the result of his death.
Wayne passed away several years later and the plan began paying Lois a monthly pension. Soon thereafter, Cleta applied for survivor benefits from the plan, attaching her 1979 marriage certificate and explaining that she and Wayne had never divorced. The plan then filed a lawsuit asking the court to determine who is the proper beneficiary of Wayne’s pension benefit.
Trial Court Decision.
The trial court concluded that Lois was the proper beneficiary of Wayne’s pension benefits, because Wayne had identified Lois as both his spouse and his beneficiary in his pension application. Cleta appealed.
Appellate Court Decision.
The Appellate Court noted that when faced with a dispute over the proper beneficiary for benefits, ERISA requires a plan administrator pay benefits in accordance with the documents and instruments governing the plan. Thus, a plan administrator must follow plan documents to determine the designated beneficiary, so long as the documents provide “a workable means” of settling the dispute.
Application of these rules to Wayne’s survivor benefits required the plan pay benefits to Wayne’s legal spouse. The plan documents define a “spouse” as “a person to whom a Participant is legally married.” Consistent with, the documents permitted a participant and his spouse to waive joint and survivor benefits only if the spouse consented to the waiver in writing. “Hence, the Pension Plan must pay spousal benefits to Wayne’s legal spouse in order to comply with ERISA’s clear mandate that plan administrators follow plan documents to determine the designated beneficiary,” the court said.
Wayne had identified Lois as his spouse, but the validity of that designation appeared to be incorrect, the Appellate Court said. Mississippi, the state in which Wayne and Lois married, observes a presumption in favor of the validity of a successive marriage, but that presumption may be overcome with evidence that the first marriage wasn’t dissolved by divorce or annulment. The trial court erroneously relied on Wayne’s designation of Lois as his spousal beneficiary.
The appellate court returned the case to the trial court to determine whether Wayne and Cleta’s marriage was dissolved. If Wayne and Cleta’s marriage was not dissolved by divorce or annulment, then Cleta would be Wayne’s surviving spouse, the court said. Cleta’s status as Wayne’s surviving spouse would take precedence over Wayne’s express selection of Lois as his spouse and beneficiary, because Cleta had not waived receipt of the benefits as required under ERISA.
This case is an example of one area of the law where the plan administrator may not rely on the documents presented because the plan (and the law in this case) required that survivor benefits be paid to the participant’s spouse unless waived by the spouse. It appears the plan administrator acted reasonably under the circumstances. Even if the plan administrator asked Wayne to affirm he had no prior spouse, the result would not have been different if Wayne was unaware he was not legally married to Cleta (or even if he was aware if he chose to lie).
If is unclear from the opinion whether Cleta was asking for recovery of the survivor payments that had already been made or just those going forward. If the former, the plan could be put in a position of having to pay out benefits twice. It would then have a claim against Lois for the erroneous payments, but it is questionable whether any judgment against Lois would be collectible.