VOYA RETIREMENT INSURANCE AND ANNUITY COMPANY v. MARY BETH JOHNSON ET AL. (Tenn.Ct.App., filed October 27, 2017). Appeal from Davidson County Chancery Court
TRIAL COURT: On August 6, 2001, Stephen Leary enrolled in the Metropolitan Government of Nashville and Davidson County Employees Deferred Compensation Plan (the “MetroMax Plan”). He designated his wife, Mary Beth Leary, as the beneficiary.
The Learys divorced on April 18, 2002. As part of their divorce, Mr. and Mrs. Leary executed a marital dissolution agreement (“MDA”), which was approved by the court and incorporated as part of the final divorce decree. In the MDA, Mr. Leary was awarded all right, title, and interest in “all retirement that he may have through his employment with the Metro Government.” Mr. Leary died on January 24, 2014, leaving his former wife, now Mary Beth Johnson, as his designated beneficiary.
Both Ms. Johnson and Mr. Leary’s estate (the “Estate”) demanded payment of the death benefits in the MetroMax Plan. On October 28, 2015, the plan administrator, Voya Retirement Insurance and Annuity Company, filed an interpleader action in the Chancery Court for Davidson County, Tennessee, seeking to join both claimants as defendants and to deposit the disputed funds with the court. See Tenn. R. Civ. P. 22.
On February 8, 2016, the trial court entered a memorandum and awarded the disputed proceeds to the Estate. The court ruled that the MDA revoked Mr. Leary’s designation of his former wife as his beneficiary. Under the terms of the plan, without a designated beneficiary, the death benefits were payable to the Estate.
COURT OF APPEALS: On appeal, The Court of Appeals at Nashville held that the retirement provision in the Marital Dissolution Agreement did not revoke the beneficiary designation in the MetroMax Plan. The Court wrote the following:
Mr. Leary designated Ms. Johnson as his sole beneficiary and “failed to amend the beneficiary designation” after his divorce. But the chancery court ruled that the MDA revoked his beneficiary designation and denied Ms. Johnson’s motion for judgment on the pleadings. We conclude that the chancery court erred in its application of Tennessee law to the undisputed facts. As explained below, a beneficiary designation in a retirement plan may only be changed as provided in the plan. The MetroMax Plan required the plan participant to send a written request to the plan administrator to amend or revoke a beneficiary designation. Although the MDA is in writing, the language therein cannot be reasonably interpreted as a revocation of Mr. Leary’s beneficiary designation. And Mr. Leary did not send the MDA to the plan administrator.
Mr. Leary’s retirement funds were marital property and thus subject to division in the MDA. This provision awarded Mr. Leary sole control of his retirement account and extinguished any marital right or interest Ms. Johnson had in the account. Ms. Johnson’s right to receive death benefits, however, depended solely on her status as the designated beneficiary. Although Mr. Leary had the ability to change his designated beneficiary at any time by sending a written request to the plan administrator, he did not do so. Even if the language in the MDA had been sufficient to revoke the beneficiary designation, Mr. Leary did not send the MDA to the plan administrator.
We will not enforce “[a] mere unexecuted intention to change” a beneficiary designation. Tennessee courts require substantial compliance with the plan’s terms to give effect to a purported beneficiary change. To sustain a finding of substantial compliance, “it must be determined from the record that [the plan participant] took all reasonable steps possible to meet the conditions imposed by the [plan].” Id. This record falls short of that standard.
with the annuity contract provisions”).
Comment: In the heat of a divorce proceeding, the task of revising one’s beneficiary designation may fall through the cracks. A simple housekeeping issue could have prevented this result.