Murder in a small town

[Guest nynaeve]

Situation:

A participant's wife murders him, and is shortly thereafter convicted and sent off to jail. She is currently appealing her conviction. She was his named beneficiary for the 401(k) Plan.

Simple question: can she take the money out.

Follow up: Does the brother, as executor of the deceased participant's estate, have any claim to the money for the estate?

Further: If she is not entitled to the money now, but her conviction is overturned and she is cleared and released, would she then again be entitled to the money? Would the Plan Administrator be well advised to wait until the appeal is finished?

I've read a little bit about these "Slayer laws", but I am not clear as to what the ultimate answer is, if there is one. Any insight is appreciated.

[Guest b2kates]

Slayer statutes are state specific.

In Pennsylvania, the conviction of murder for the wife would result in the benefits not being payable to the wife. Instead they would be payable to the estate, as if the wife had predeceased her husband

[Ron Snyder]

b2k-

You're presuming that the PA statute is not pre-empted by the ERISA (REA) provision that makes a surviving spouse the beneficiary of the participant absent a contrary designation with spousal consent.

The Plan Administrator is entitled to operate on the reasonable belief that federal law applies, rather than state law. This may be a case for invoking interpleader.

[david rigby]

What about the plan provisions? If convicted spouse is not the beneficiary under slayer statute, would not the plan provisions guide who is next in line? (Might not be the estate.)

BTW, perhaps the plan's legal counsel should be consulted. Possibly counsel will suggest the plan "hold pending appeal", but also suggest the plan invest the account in something that is protected from market flcutuations. (I have no idea, just a thought.)

[Mike Preston]

The Plan Administrator is entitled to operate on the reasonable belief that federal law applies, rather than state law. This may be a case for invoking interpleader.

While I agree with the comment regarding interpleader, I'm curious what the source of the first sentence is. We might *LIKE* it if we could advise our clients of such entitlement, but I'm not aware of one.

Certainly we know about the ERISA preemption clause, but I'm not talking about that because there are enough issues not covered by that clause, including the ubiquitous paraphrase regarding "not having a material impact on the plan" rules that have allowed state courts to craft exceptions in certain circuits that don't exist in others.

I think a more fair statement is that, in general, ERISA preempts state law. However, if the courts find that this issue is not covered by the preemption, the Plan Administrator may find that monies were paid to people not entitled to payment unless they take steps to ensure whether Federal or State law applies to this issue.

And interpleading is just what the consultant ordered, in this case.

[Guest DWL]

If the wife wants the money, interpleader is almost certainly your best bet. Assuming there's a slayer statute in play, the preemption issue isn't clear-cut enough to feel safe about deciding one way or other, or at least wasn't last I checked. But where you have such a small amount involved, fighting over it is going to eat up a big chunk of what's there.

The one time I had a similar situation, we laid out the issues to the employer, the employer explained to the wife (who'd killed her husband) that the slayer statute was potentially applicable and that they wouldn't be able to pay her or anyone else until that was sorted out, and she decided to disclaim whatever interest she might have in the account and let it go to the kids. Problem solved.

[Guest mjb]

There is a priciple in equity that a wrongdoer cannot profit from their own wrong, e.g. a beneficary who kills the insured cannot collect the LI proceeds. There have been cases in NY and LA where fed cts have prevented a spouse who murdered the employee from receiving benefits under an ERISA plan. Exec/children could file a claim with plan to have benefits denied to the spouse and paid to a default bene on the grounds that the spouse is a wrongdoer if her appeal is denied.

[GBurns]

Mike,

While waiting to see how vebaguru answers your question, I have to wonder why you seem to think otherwise. You posted " ..I'm curious what the source of the first sentence is. We might *LIKE* it if we could advise our clients of such entitlement, but I'm not aware of one."

It seems to me that since this is obviously an ERISA governed plan, the Plan Admistrator would be more observant to and be more concerned with complying with ERISA rather than state law unless it was an obvious and generally known as settled issue to which state law applies.

I noted that mjb refers to Federal Court cases in NY and NJ and not to state court cases.

While it most likely is that the state has a "slayer" or "unjust enrichment" law that would be applicable, I do not think that that is what vebaguru is saying. In my opinion, he is saying that pre-emption is not automatic so that thorough consideration of all aspects is needed, most likely resulting in interpleader.

So to me it is more Can you show why the Plan Admistrator is NOT entitled to ERISA reliance?

[Mike Preston]

It seems to me that since this is obviously an ERISA governed plan, the Plan Admistrator would be more observant to and be more concerned with complying with ERISA rather than state law unless it was an obvious and generally known as settled issue to which state law applies.

While it most likely is that the state has a "slayer" or "unjust enrichment" law that would be applicable, I do not think that that is what vebaguru is saying. In my opinion, he is saying that pre-emption is not automatic so that thorough consideration of all aspects is needed, most likely resulting in interpleader.

So to me it is more Can you show why the Plan Admistrator is NOT entitled to ERISA reliance?

Well, maybe the Plan Administrator is. But, then again, maybe the Plan Administrator isn't. I'm not aware of anything which makes it clear one way or the other. You would have the scale tipped in favor of ERISA unless something is "generally known as settled issue to which state law applies." I'm not sure it goes that far. Which was the purpose of my query. Maybe there is a cite that indicates that. But I'm not aware of it.

In the area of beneficiary designation, I thought that it was generally a settled issue that one looks to state law for the determination. I thought that the post-death QDRO modification cases specifically revolved around state law being the determining factor.

Wouldn't that push an attorney representing somebody other than the slayer to argue that it was generally known as a settled issue to which state law applies?

In any event, all roads lead to interpleader, in my opinion, unless there is a specific cite that argues to the contrary. I'm not saying there isn't necessarily such a cite, just that I've not run across it.

[401 Chaos]

You may want to check out Atwater v. Nortel Networks, a fairly recent North Carolina District Court case addressing some of these issues, if you haven't already. I think the preemption issue is still an open one but there is also a possible argument that there may be a slayer provision under federal common law. At any rate, I think the interpleader route is clearly the correct choice.

http://www.ncmd.uscourts.gov/Opinions/Sep05/04cv503op.pdf