Plan Administrator entitled to precisely follow instructions in Plan Summary to determine validity of Beneficiary Designation

A recent case highlights the fact that plan administrators are entitled to follow the Plan’s prescribed procedures to determine the validity of a beneficiary designation. The case is Ruiz v. Publix supermarkets.

During her employment, Ms. Rizo participated in two company sponsored retirement plans subject to ERISA. Both plans’ summary plan descriptions (SPD) provided very specific instructions as to how a participant designates a beneficiary. The SPD’s required that beneficiaries be designated on  a “Beneficiary Designated Card that must be completed, signed and returned to the Publix Corporate Office in order for the designation to be valid.

In 2008, Rizo properly completed the Beneficiary Designation Cars naming two nieces and a nephew as beneficiaries. In September of 2011, Rizo was diagnosed with cancer. On January 15, 2015, when Rizo was getting her affairs in order after her cancer had progressed, Rizo called Publix to find out how to change her beneficiaries for the plans. Her good friend, Arlene Ruiz, was with Rizo while Rizo made the call on speaker phone. According to Ruiz, the Publix representative told Rizo that in order to change her beneficiaries, she had to write a letter to Publix containing certain information, including the beneficiary designations, and sign the letter. She could also include the Beneficiary Designation Cards if she could get a hold of them, but they were not important. Rizo followed the instructions. She included the Beneficiary Designation Cards but did not sign them and only wrote  “As stated on letter” on the card.

Ms. Rizo died the day after the letter and cards were mailed to Publix.

The Plans paid both death benefits to Rizo’s nieces and nephew, in accord with the original 2008 designations. When Ms. Ruiz filed a claim for the death benefits, the plans denied the claim because properly completed Beneficiary Designation Cards had not been filed naming her as the sole beneficiary. The denial referenced the SPDs’ specific language about the requirements of how to make a proper beneficiary designation, including the requirement that the card be signed by the participant. Ms. Ruiz sued the Plan, claiming that the letter identifying her as the beneficiary was sufficient to entitle her to the death benefits.

In a summary proceeding where the court was required to construe the facts most favorably to Ruiz, the court found that: (1) Rizo intended to change the beneficiary of her benefit in the two Company plans to Ruiz and attempted to do so; and (2) Rizo did not strictly comply with the Summary Plan Descriptions' directives for how to change her beneficiaries.

In its decision, the court found that Publix was entitled to demand strict compliance with its procedures on changing beneficiaries. It rejected the argument that substantial compliance with the beneficiary change procedure is sufficient, and Rizo should be deemed to have substantially complied with the procedure.

Since the court was required to construe the facts most favorably to Ms. Ruiz, there was no indication whether the court was influenced by the fact that Ruiz was present during the call to Publix and assisted Rizo in preparing the letter. Nevertheless, the decision is favorable for plan administrators in affirming that compliance with the plan’s stated procedures is all that is required. The other lesson of the decision is that employers should train their personnel on the correct procedures for changing beneficiaries (as well as any other procedures their employees are required to administer. The fact that Rizo was given incorrect advice to send in a letter, and she followed that advice, could just as easily have tipped the scales in favor of the claimant Ruiz.