In Burns v. Orthotek, Inc. Employees’ Pension Plan and Trust, No. 10-1521 (7th Cir. 2011), the Seventh Circuit Court of Appeals (the “Court”) was asked to determine the beneficiary of a deceased plan participant. In this case, the participant, Dr. Richard Burns, had designated his three sons as the beneficiaries under a retirement plan subject to ERISA (the “Plan”). However, under ERISA those designations are effective only if his widow, Cheryl Burns, consented to her husband’s waiver of a qualified pre-retirement survivor annuity (a “QPSA”) (of which she would be the beneficiary). She did sign a written consent form for the waiver. However, after her husband died, she claimed her consent was invalid because it was not witnessed, as required by ERISA. The Plan found her consent valid and denied her claim for benefits as the payee of a QPSA under the Plan. The district court upheld that decision, invoking the substantial-compliance doctrine and finding that the consent form Mrs. Burns signed substantially complied with ERISA.
The Court ruled that the substantial-compliance doctrine does not apply. This obtains because ERISA expressly requires that the widow’s consent be witnessed, and substantial compliance cannot replace this specific requirement.
Still, the Court found that the Plan was within its discretion to deny Mrs. Burns’s claim for the QPSA. Under the facts of this case, Dr. Burns, the plan representative, is deemed to have witnessed his wife’s written consent to the QPSA waiver, meeting the ERISA witness requirement. Dr. Burns was not present when his wife’s signed the consent form. But he was the only plan representative for the Plan (being the plan administrator, named fiduciary and primary participant of the Plan, as well as the principal shareholder, officer and sole director of the employer maintaining the Plan). He gave his wife the form to sign. Dr. Burns obviously knew from his own personal knowledge that the “Cheryl Burns” who signed and returned the form to him was his wife, whose consent was required to complete the necessary paperwork to effectuate the QPSA waiver and designate his sons as his beneficiaries. The Plan was entitled to conclude that the foregoing satisfies the ERISA witness requirement. Therefore, Mrs. Burns’s consent to the waiver was valid, and she is not entitled to a QPSA from the Plan. As such, the Court affirmed the district court’s decision to uphold of the Plan’s denial of the Mrs. Burns’s claim for the QPSA.