Takeaway: Retirement plan participants should continue to closely follow the processes for beneficiary designation laid out in a plan’s governing documents. Any deviation from the prescribed means for communicating beneficiary changes, even if plan participants clearly convey changes in writing, is likely to run afoul of the substantial compliance doctrine, which obligates a plan administrator to pay benefits as specified by plan documents without resorting to external documents.
A holding by the 7th U.S. Circuit Court of Appeals drives home the importance of strictly adhering to instructions dictated by the governing documents of a retirement plan regarding beneficiary designations.
An employee, who participated in an employer-administered retirement plan, requested that the plan remove his ex-wife as his primary beneficiary after their divorce in 2022. The employer’s plan documents provided specific instructions on how to change the beneficiary of a retirement account by either contacting the benefits center at a designated phone number or updating the beneficiaries online.
Despite these clear instructions, the employee asked his secretary to submit the change request via fax sent on Oct. 4, 2022. In response, the benefits center changed the status from “spouse” to “ex-spouse,” but didn’t remove her as the primary beneficiary.
When the employee died three months later, the plan still listed his ex-wife as his primary beneficiary. This led to a dispute between the employee’s estate, represented by his sister, and his ex-wife over the account funds. While cross-motions for summary judgment by the parties were pending, the district court determined that the employee’s sister also had a potential interest as a surviving contingent beneficiary. Although the sister died during the litigation, the court joined her estate as a party to the action. The plan filed an interpleader action, deposited the funds with the court, and dismissed itself from the action.
The district court determined the employee had successfully removed his ex-wife as beneficiary and granted summary judgment in favor of his sister’s estate. The ex-wife appealed.
On appeal, the 7th Circuit questioned whether the employee had met the substantial compliance doctrine, a federal common law doctrine long recognized in Employee Retirement Income Security Act (ERISA) cases. The court cited the U.S. Supreme Court’s discussion of the doctrine in Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, where the high court said a plan administrator “is obliged to act in accordance with the documents and instruments governing the plan and ERISA provides no exemption from this duty when it comes time to pay benefits.” The doctrine obligates the administrator to pay benefits in conformity with plan documents without resorting to external documents, which promotes simple administration.
The appellate court applied the substantial compliance test, which requires that the insured: “1) evidenced his intent to make the change and 2) attempted to effectuate the change by undertaking positive action which is for all practical purposes similar to the action required by the change of beneficiary provisions of the policy.”
The first element is “undeniably clear,” the court found, as the employee’s fax unequivocally stated his intent to change the beneficiary. Although his ex-wife argued that the employee’s request in the fax for any “necessary paperwork” indicated a lack of finalized intent, the court disagreed, finding the fax was a clear expression that he wanted the plan to remove her from all his benefit plans. “[S]ubstantial compliance does not require the participant to believe they have completed every step in the process,” the court noted.
Turning to the second element, the court examined whether the employee had undertaken positive action similar to the action required by the plan documents and determined that he had not. Stating that the employee did not attempt to follow the required procedures, the court noted that “nowhere in the planned documents is the participant allowed to request a beneficiary change via fax … [this method] deviates materially from the plan's terms and falls short of being for all practical purposes similar to the procedures required by the plan documents.” Further, the employee’s request that the plan fax him any necessary paperwork suggests he knew he may have needed to take additional steps to remove his ex-wife as a beneficiary but did nothing more.
The employee did not substantially comply with the plan’s beneficiary-change requirements, the court ruled, finding that his ex-wife remained the primary beneficiary at his death. The court reversed judgment for the sister and remanded for entry of judgment for the ex-wife.
Packaging Corp. of America Thrift Plan for Hourly Employees v. Langdon, 7th Cir., No. 25-1859 (Feb. 2, 2026).
Rosemarie Lally, J.D., is a freelance legal writer based in Washington, D.C.
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