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A decedent’s stepdaughter was entitled to the decedent’s 401(k) plan benefits in accordance with the most recent beneficiary designation form. This was the decision of the Eighth Circuit U.S. Court of Appeals in Alliant Techsystems, Inc., et al. v. Marks (No. 05-3614).
James Marier was married to Kathleen for 12 years, and he developed a close relationship with Kathleen’s adult daughter, Tracy Marks. Mr. Marier and Ms. Marks treated each other as father and daughter, as he had no children and she had no father. Ms. Marks often accompanied Mr. Marier to his medical appointments when his health declined, and she watched over his care. In 2001, Mr. Marier executed a power of attorney in favor of Ms. Marks, and he named her as personal representative of his will in 2002 and 2003. In 2002, Mr. Marier named Ms. Marks as his sole residuary beneficiary in his will.
Mr. Marier cared for his widowed mother, Rose, by looking after her financial affairs and making periodic trips from his home in Minnesota to her home in Pittsburgh to check on her. Ms. Marier had been adjudicated incapacitated, and Irwin Bank and Trust had been appointed guardian of her estate. Mr. Marier also had three siblings, but he was not close to them.
For most of his career, Mr. Marier worked as an engineer at Honeywell, but he later became employed by Alliant Techsystems without changing jobs. Mr. Marier participated in Alliant’s 401(k) plan, which specifies that a beneficiary designation will become effective when “executed by the participant and received by the plan.” The plan states that it will give effect to any designation of a nonspouse beneficiary by name that is accompanied by a description of the beneficiary’s relationship to the participant, even if that relationship does not exist at the time of execution or distribution.
In 1996, Mr. Marier had completed a beneficiary designation form naming his then-wife Kathleen as the primary beneficiary of his 401(k) plan benefits and Ms. Marks as his secondary beneficiary, listing her relationship as “stepdaughter.” After Mr. Marier and Kathleen divorced in 2000, Mr. Marier submitted a new beneficiary designation form designating his mother Rose as the primary beneficiary and again listing Ms. Marks as his secondary beneficiary, describing her relationship as “former stepdaughter.” Then, on Sept. 21, 2002, Mr. Marier submitted a third beneficiary designation form naming Ms. Marks as the primary beneficiary; on this form, Mr. Marier left blank the line listing the beneficiary’s relationship to him.
In October 2002, Mr. Marier had surgery to remove a brain tumor. On Oct. 23, 2002, while Mr. Marier was still hospitalized, Alliant’s plan administrator returned his third beneficiary designation form with a corrections checklist instructing him to complete the blank for Ms. Marks’ relationship. On Dec. 26, 2002, Mr. Marier called the 401(k) plan’s customer service line to confirm that Ms. Marks was his only beneficiary. After Mr. Marier died on Sept. 25, 2003, Rose Marier and Ms. Marks filed competing claims for his 401(k) plan benefits. Alliant then filed an action in the U.S. District Court for the District of Minnesota, seeking a determination as to the proper beneficiary of Mr. Marier’s 401(k) plan benefits. The district court held that Rose Marier was entitled to the benefits because Mr. Marier’s final beneficiary designation in favor of Ms. Marks was invalid. Ms. Marks appealed, and the Eighth Circuit reversed the district court’s ruling.
In rendering its decision, the Eighth Circuit initially explained, “The record reveals that Alliant did not abuse its discretion in finding that James’ 2002 beneficiary designation was enforceable under its plan terms even though the change of beneficiary form did not describe Tracy’s relationship to James. Under the abuse of discretion standard, we uphold an administrator’s determination as long as it is reasonable. Exercising the discretion granted to it by the plan, Alliant determined that the missing relationship information in James’ 2002 beneficiary designation form was not a material omission and that his designation of Tracy as primary beneficiary was valid ‘based upon the terms of the plan.’”
The Eighth Circuit went on to conclude, “First, Alliant’s determination that the 2002 designation should be enforced despite the missing relationship information is consistent with the plan’s goal of distributing participants’ accounts in accordance with their wishes. The plan gives participants the exclusive right to designate and change beneficiaries. Alliant determined that the plan documents do not contain a directive that relationship information must be provided in order to make a beneficiary designation effective. Next, Alliant’s interpretation is consistent with the plan’s clear language. The plan provides that beneficiary designations are effective when executed by the participant and received by the plan, so long as the plan receives the designation within the participant’s lifetime. Likewise, Alliant’s interpretation does not render other portions of the plan inconsistent or meaningless.
“Finally, we consider whether Alliant’s interpretation of the plan conflicts with any of ERISA’s substantive or procedural requirements. ERISA is silent on the processes for designating nonspouse beneficiaries and for resolving disputes between competing claimants to plan proceeds, but it defines a beneficiary as ‘a person designated by a participant who is or may become entitled to a benefit.’ Where the participant’s designation controls beneficiary status, as it does in Alliant’s plan, we look to the plain meaning of the plan documents to determine the beneficiary. As discussed above, Alliant’s determination that the 2002 designation was valid is consistent with plan terms. Thus, that determination does not conflict with ERISA’s requirements.”
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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