ERISA-Fourth Circuit Holds That ERISA Does Not Preempt A State Court Order Requiring A Plan’s Named Beneficiary To Turn Over Death Benefits To The Estate Of The Deceased Participant

In Andochick v. Byrd, No. 12-1728 (4th Cir. 2013), the plaintiff, Scott Andochick (“Andochick”), brought this suit seeking a declaratory judgment that ERISA preempted a state court order requiring him to turn over, to the administrators of the estate of the deceased Erika Byrd (“Erika”), benefits which were to be paid with respect to Erika under ERISA retirement and life insurance plans. The district court had dismissed the preemption claim, and Andochick appealed.

In this case, in February 2005, Andochick and Erika had married. During the marriage, Erika worked as an attorney at Venable, LLP, where she participated in the Venable Retirement (“401(k)”) Plan and the Venable Life Insurance Plan (the “Plans”). The Plans are subject to ERISA. Erika executed beneficiary designations for the Plans, naming Andochick as her primary beneficiary. In July 2006, Andochick and Erika separated and entered into a marital settlement agreement. In the agreement, Andockick waived his rights to survivor benefits under the Plans, and agreed to execute any documents required to carry out the provisions of the agreement. In December 2008, Andochick and Erika divorced, and the judgment of divorce incorporated their marital settlement agreement.

When Erika died in April 2011, her parents, Ronald and June Byrd (the “Byrds”), qualified as administrators of her estate. At the time of her death, Erika had failed to name a new beneficiary under the Plans. Accordingly, the plan administrators of the Plans determined that the survivor benefits under the Plans should be paid to Andochick, the named beneficiary. The Byrds filed suit in state court to have Andochik’s waiver of survivor benefits enforced, and to have him pay the benefits-when paid to him from the Plans- to the estate. The state court granted the Byrds the relief they sought, and this suit ensued.

In analyzing the case, the Fourth Circuit Court of Appeals (the “Court”) noted that ERISA obligates a plan administrator to pay plan proceeds to the named beneficiary, here Andochick. The Court said that the only question being raised is whether ERISA prohibits a state court from ordering Andochick, who had previously waived his right to those benefits, to relinquish those proceeds-once received- to the administrators of Erika’s estate. It further said that the Supreme Court, in Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, held that an ERISA plan administrator must distribute benefits to the beneficiary named in the plan, regardless of any state-law waiver purporting to divest that beneficiary of his right to the benefits. But Kennedy had explicitly left open the question-raised here- of whether, once the benefits are distributed by the administrator, the decedent’s estate can enforce a waiver against the plan beneficiary.

The Court then ruled that ERISA and the Kennedy decision do not cause ERISA to preempt post-distribution suits against ERISA beneficiaries (that is, individuals named as beneficiaries under a plan). As such, the Court affirmed the district court’s decision that ERISA does not preempt the state court’s order for Andochick to pay over to Erika’s estate the benefits he will receive from the Plans as the named beneficiary.

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