Keen v. Weaver, 121 S.W.3d 721 (Tex. 2003).
Husband named Wife as the beneficiary of his annuity plan which was
governed by ERISA. Husband and Wife divorced. Wife waived any interest
in the plan in the divorce settlement agreeing that the plan would be
Husband’s sole property. Husband died 13 years after divorcing Wife
without changing the beneficiary designation. Relying on the beneficiary
designation, the annuity company began paying Wife. Husband’s Mother,
the contingent beneficiary, claimed the proceeds. The trial court
rejected Mother’s claim and held that Wife was entitled to the proceeds.
The appellate court reversed holding that the Texas redesignation
statute (Family Code § 9.302), although preempted by ERISA under
Egelhoff v. Egelhoff, 121 S. Ct. 1322 (2001), applied as federal common
law and thus prevented Wife, a former spouse, from receiving the
annuity. Weaver v. Keen, 43 S.W.3d 537 (Tex. App.—Waco 2001).
The Texas Supreme Court affirmed the appellate court in a five to four
decision but based its decision on the Wife’s waiver, not the
redesignation statute. The court explained that ERISA does not prohibit
a plan administrator from recognizing a beneficiary’s waiver,
disclaimer, or other repudiation of plan benefits. Because Wife’s waiver
of her interests in the plan was specific, knowing, and voluntary, the
court deemed it to be enforceable under federal common law. According,
the plan’s benefits are payable to Mother, the contingent beneficiary.
The four justice dissent explains that ERISA clearly preempts state law
and that there is no basis to distinguish between the Texas
redesignation statute and Wife’s waiver. The opinion explains that the
majority “is unable to supply any reason, real or imagined, why ERISA
would explicitly require plans to be administered according to their
terms, preempt state law to assure that end, and then reincorporate
state law into federal common law so that plans are not administered
according to their terms, thereby making the express statutory language
[of ERISA] simply illusory.”
Moral: Despite the holding in this case, designations of beneficiaries
on plans governed by ERISA should be promptly changed upon divorce.
Prediction: This case, in my opinion, is likely to be appealed to the
United States Supreme Court.
Comment: This decision reflects the court’s reluctance to conform with
the law as pronounced by the United States Supreme Court when to do so
would be contrary to Texas law and public policy. The United States
Supreme Court indicated that plan administrators should not have to
master the relevant laws of 50 states. The same logic would apply to how
each state determines the contents of federal common law. Although the
legal basis of the Texas court’s decision is problematic, it carries out
the highly likely intent of Husband, albeit unexpressed, to not have
annuity payments made to an ex-spouse from whom he had been divorced for
13 years. This issue is certain to arise repeatedly and should be
addressed by an amendment to ERISA which expressly voids the designation
of an ex-spouse which is made prior to divorce.