Summary
The Seventh Circuit considered whether a retirement-plan participant substantially complied with the plan’s requirements to remove his former spouse as beneficiary. The court held that sending a fax expressing the participant’s intent, without using the plan’s designated beneficiary-change procedures, did not constitute substantial compliance. The court reversed the judgment for the contingent beneficiary’s estate and remanded for entry of judgment for the former spouse.
Topics
Practice areas
Questions Presented
- Whether the district court's determination that Kleinfeldt substantially complied with the Plan's beneficiary-change requirements was subject to de novo review.
- Whether the federal common-law substantial-compliance doctrine remains available after Kennedy v. Plan Administrator for DuPont Savings & Investment Plan in an ERISA interpleader action.
- Whether Kleinfeldt's October 4, 2022 fax substantially complied with the Plan's beneficiary-change requirements.
Holdings
- The question whether Kleinfeldt substantially complied with the Plan's beneficiary-change requirements is a question of law reviewed de novo because the Plan administrator did not exercise discretion to make a final beneficiary determination.
- Kleinfeldt did not substantially comply with the Plan's beneficiary-change requirements because, although his fax clearly evidenced intent to remove Langdon, he did not take positive action for all practical purposes similar to the procedure required by the Plan.
- Because Kleinfeldt did not substantially comply with the Plan's beneficiary-change requirements, Langdon remained the primary beneficiary at his death and Scholz's Estate remained the contingent beneficiary.
Key quotations
“You should keep your beneficiary designation and your beneficiary’s address up to date. To do so, contact the PCA Benefits Center at [a designated phone number] or you can update your beneficiaries online.” (3)
“On these facts, we hold that Kleinfeldt did not substantially comply with the plan’s beneficiary-change requirements.” (17)
“For the foregoing reasons, the judgment is REVERSED and REMANDED for entry of judgment for Langdon.” (18)
Factual background
Carl Kleinfeldt participated in PCA's ERISA-governed Thrift Plan and designated his then-wife, Dena Langdon, as the primary beneficiary and his sisters as contingent beneficiaries. After divorcing Langdon, Kleinfeldt directed his secretary to fax PCA requesting that Langdon be removed as a beneficiary from several benefit accounts, including his 401(k), pension, and life insurance accounts. PCA removed Langdon from certain insurance benefits but changed her retirement-account status to ex-spouse without removing her as primary beneficiary. Kleinfeldt died before completing the Plan's specified beneficiary-change procedure, resulting in competing claims by Langdon and the estates of Kleinfeldt and his sister Terry Scholz.
Procedural history
PCA filed an interpleader action under Federal Rule of Civil Procedure 22 after competing claims arose concerning Kleinfeldt's retirement-account proceeds and deposited the funds with the district court. PCA and the Plan were dismissed, and the district court joined Scholz's Estate under Rule 19(a) after determining that it might have a contingent-beneficiary claim. Following discovery, Langdon and the Kleinfeldt Estate filed cross-motions for summary judgment; the court denied both motions and sua sponte granted summary judgment to Scholz's Estate based on substantial compliance. The Seventh Circuit reversed and remanded for entry of judgment for Langdon.
Remand instructions
Remanded for entry of judgment for Langdon.