Given the continuing wave of ERISA litigation, this article has become a mainstay of The Speed Reader. A sample of recent cases is provided below.
The most common type of ERISA case for approximately the past fifteen years has involved retirement plan participants’ allegations that plan fiduciaries caused participants to pay excessive recordkeeping and investment fees and included one or more poorly-performing investment options in the plan. Recent cases in this category include the following:
Another type of recent ERISA case is as follows:
Ragan v. Ragan (decided on May 27, 2021 by the Court of Appeals of Colorado, Division V): The participant in an ERISA plan properly designated his spouse as his beneficiary, via the plan’s forms. The parties subsequently divorced, but the participant never changed his beneficiary designation. Thereafter, upon the participant’s death, his plan benefits were paid to his beneficiary (his former spouse). The participant’s estate then sued her, to recover the benefits that were paid to her. In deciding whether the payment complied with applicable law, the court addressed the following two statutes:
The court began its analysis by noting that ERISA preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” In this connection, the court cited other courts’ decisions that ERISA preempts any state law that automatically revokes a beneficiary designation upon divorce. (The only exception is in the context of a benefit waiver by private agreement between the divorcing parties. However, the beneficiary in this case did not execute a waiver of her right to receive the participant’s plan benefit upon his death.) Adopting those courts’ decisions, the Colorado court concluded that absent an express waiver of rights to an ERISA plan’s benefits, “ERISA precludes a lawsuit against a former spouse to recover insurance proceeds that were distributed to [her] as the named beneficiary” under the plan’s governing documents. Therefore, the distribution to the beneficiary in this case was proper and she does not have to pay those benefits to the participant’s estate.
I often review plan documents that include language similar to the Colorado statute involved in this case. If the plan in this case had included that language, then the court would have applied it, there would have been no ERISA preemption issue, and the participant’s estate would have prevailed in this lawsuit.