Alcorn and his second wife Bonnie entered into a separate maintenance agreement about a year before his death. Under the agreement, they each “waive[d] any interest they have in the other party’s life insurance proceeds,” and they also agreed “to waive and release any rights or claims they may now have to any retirement pay [or] benefits.”
After signing the agreement, Alcorn did not change the beneficiary of his employer-sponsored life insurance coverage and 401(k) retirement plan, and those benefits were paid by the ERISA plan administrator to Bonnie, who remained the beneficiary under the terms of the plan at the time of Alcorn’s death.
Alcorn’s daughters, individually and on behalf of his estate, sued Bonnie in state court for breach of contract, asserting that she had contractually waived her right to benefits under the life insurance policy and the retirement plan. Bonnie moved to dismiss the complaint, arguing that ERISA preempted the daughters’ state law claims and that the benefits were properly paid to her, relying on the United States Supreme Court decision in Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285 (2009).
The trial court agreed with Bonnie and dismissed the complaint, concluding that the “waiver executed in the settlement agreement was not ERISA compliant,” because it did not meet the requirements for a qualified domestic relations order.
The Georgia Court of Appeals reversed, finding that once the ERISA plan benefits had been paid to the beneficiary, ERISA did not preclude the daughters’ state law claim challenging the beneficiary’s right to retain the funds. Alcorn v. Appleton, 308 Ga. App. 663, 708 S.E.2d 390 (2011).
The Georgia Supreme Court granted Bonnie’s petition for certiorari, and then affirmed the decision of the court of appeals. “[O]nce funds from ERISA-covered plans are received by the proper participant or beneficiary,” the court said, “the participant or beneficiary is not judgment proof, and the funds are not sheltered from state law causes of action.”
A different result was not required by the Kennedy decision, the court said. “In that case, the Supreme Court held that the estate could not maintain a state law cause of action against the employer and the plan administrator because the funds had been distributed to the beneficiary according to the plan documents …. The Supreme Court stated that it expressed no view ‘as to whether the Estate could have brought an action in state or federal court against [the beneficiary] to obtain the benefits after they were distributed.’” Citing 555 U.S. at 300 n.10.
Consequently, the Georgia Supreme Court concluded that the trial court “was not precluded by Kennedy, or any other authority, from adjudicating the merits of [the daughters’] state law cause of action against [Bonnie] for any alleged breach of the Separation Agreement or purported waiver of her rights to the proceeds.”
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