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Published on Tuesday, August 20, 2019

Slayer Laws and ERISA

beneficiary checksUnder the Employee Retirement Income Security Act of 1974 (ERISA), a typical retirement plan describes a participant’s right to designate a beneficiary and provides a default beneficiary when a participant fails to do so or if a beneficiary designation is invalid for any reason.  Given the violence reported today with the seemingly increased workplace shootings and mayhem, would, for example, a 401K of an employee pass on to the designated beneficiary who had killed the employee?  Or could that beneficiary get the payout of any work-sponsored life insurance?

Unless the designation is declared invalid, ERISA rules apply, and the beneficiary would be paid.  But under Michigan law, there is a provision called a “Slayer” rule. More specifically, the Estates and Protected Individuals Code (EPIC), MCL 700.1101 et seq., provides that a devisee who “feloniously and intentionally” kills a decedent forfeits all benefits from the decedent's estate. MCL 700.2803 states, in pertinent part:

(1) An individual who feloniously and intentionally kills the decedent forfeits all benefits under this article with respect to the decedent's estate, including an intestate share, an elective share, an omitted spouse's or child's share, a homestead allowance, a family allowance, and exempt property. If the decedent died intestate, the decedent's intestate estate passes as if the killer disclaimed his or her intestate share.

(2) The felonious and intentional killing of the decedent does all of the following:

(a) Revokes all of the following that are revocable:

( i ) Disposition or appointment of property made by the decedent to the killer in a governing instrument.

( ii ) Provision in a governing instrument conferring a general or nongeneral power of appointment on the killer.

( iii ) Nomination of the killer in a governing instrument, nominating or appointing**910 the killer to serve in a fiduciary or representative capacity, including a personal representative, executor, trustee, or agent.

(b) Severs the interests of the decedent and killer in property held by them at the time of the killing as joint tenants with the right of survivorship, transforming the interests of the decedent and killer into tenancies in common.

Many states have similar laws, generally called “Slayer Laws.”

The U.S. Supreme Court has not yet ruled on the interplay between state Slayer laws and ERISA.  In particular, Section 514(a) of ERISA preempts a state law where the state law “relate[s] to” an employee benefit plan.  Therefore, Slayer laws may be invalid and the payout to the murderer beneficiary would have to be made.  

There has been one case in the 7th Circuit Court of Appeals that reviewed the interplay of these laws. In Laborers’ Pension Fund v. Miscevic, No. 17‐2022 (7th Circuit Court of Appeals, 1/29/19), an Illinois resident was killed by his wife who was determined to be legally insane at the time of the killing. Illinois has a slayer statute. The question before the court was whether the wife should receive the retirement benefits because, she argued, ERISA preempted the Illinois law.  The employee’s estate argued against preemption, so the minor children are the proper beneficiaries by default. The 7th Circuit ruled in favor of the deceased’s estate, and the wife would not get any benefit. 

If the Supreme Court ihad a case before it would be hard pressed to allow a loophole whereby the murderer benefits from the murder.  It should be noted that a number of federal district courts have ruled similarly. Therefore, until a definitive ruling is made, plan administrators should work with legal counsel to ensure that a murdered plan participant’s benefit ends up in the right hands.

 

Source: Thompson Hine LLP 8/8/19, The Gallagher Law Firm

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