When a vested pension plan participant dies without having named a beneficiary, there is bound to be litigation as to who is entitled to the participant’s pension benefits. Kinder Morgan, Inc. v Crout, No. 19-20037 (5th Cir. May 18, 2020) is just such a case.
In Kinder, Danny Lee Crout was an employee of Kinder Morgan Inc. and participated in its retirement Savings Plan until his death in 2016. As of his passing, Danny’s account balance under the Plan totaled $828,459.19 and had no designated beneficiary. Danny’s wife Joanne Crout and his three children all claimed entitlement to the account balance. Given these multiple claims for the same benefit fund, the Savings Plan filed an “interpleader” complaint in a Texas federal district court, asking it to sort things out and determine the rightful beneficiary.
The district court observed that, under the Savings Plan, a participant could designate, in writing, a beneficiary in the event of the participant’s death. However, if the participant was married, he/she could designate someone other than his/her spouse only if (i) the spouse consented in writing, or (ii) the participant and spouse were not married throughout the one-year period ending on the date of the participant’s death.
The Savings Plan further provided that if the participant did not designate a beneficiary, the participant’s account balance would be paid, in the following order of priority, to (i) the participant’s surviving spouse, (ii) the participant’s children, (iii) the participant’s surviving parents in equal shares, or (iv) the participant’s estate.
Joanne maintained that, under the terms of the Savings Plan, she was the rightful beneficiary of Danny’s account balance because Danny failed to designate a beneficiary and she was first in the order of priority. The children, on the other hand, advanced two arguments as to why they were the rightful beneficiaries. First, they alleged that, based on a previous marriage license application by Joanne, there was a question as to whether she was actually Danny’s surviving spouse because a prior marriage without a divorce would have invalidated her marriage to Danny. The children also argued that Danny had submitted a beneficiary designation in their favor under a prior “Oxy” benefit plan, which they contended had merged into the Savings Plan when Kinder Morgan acquired Oxy.
The district court rejected both of these arguments. It explained that a marriage license application is only the first step towards a marriage; it does not create a marriage and there was no evidence that Joanne went through with the process with the co-applicant. The district further explained that the children failed to present any evidence that the purported beneficiary designation under the prior Oxy plan was valid under the Kinder Savings Plan, or that the Savings Plan absorbed the Oxy plan. But, even if the beneficiary designation under the prior Oxy plan attached to the Savings Plan, the children presented no evidence that Joanne consented in writing to the designation, or that she was not married to Danny through-out the one-year period prior to his death. Therefore, the district court ruled that Joanne was the rightful beneficiary of Danny’s account balance, and the Fifth Circuit Court of Appeals affirmed.
By the time the Fifth Circuit ruled, the litigation had been in process for over three years and Joanne had undoubtedly incurred substantial legal fees in prosecuting her claim. There was, however, a silver lining for Joanne: In the course of the litigation, Danny’s account balance had grown by nearly $300,000 to over $1.115 million dollars.
The important takeaway from this post is that you should have a written beneficiary designation on file with the administrator of your pension plan. Otherwise, your pension benefits might go to an unintended recipient after you pass, or your intended recipient might have to endure an exhausting and expensive legal battle for the benefits.
[Want to read more pension posts by pension lawyer Eva Cantarella? Go to Eva’s Pension Justice 4 You Facebook page and click on Posts on the left side of the Page. To be automatically notified of new posts, click the Like and Following tabs just below the picture at the top of the Page. Have a pension problem? Contact Eva for a free telephone consult at 248-335-5000, or 248-762-5441, or [email protected], or [email protected].]