Compliance September 14, 2005

Wife Killer Not Entitled To Benefits

September 14, 2005 (PLANSPONSOR.com) - The US District Court for the Middle District of North Carolina ruled that a retirement plan administrator breached its fiduciary duty by paying benefits to a deceased participant's husband, indicted for killing his wife.
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BNA reports that, in spite of being notified that Michael Peterson had been indicted for killing his wife Kathleen, the administrator of the three retirement plans for which she named him beneficiary had paid him nearly $400,000.   US District Judge Frank Bullock said the indictment “made it at least foreseeable” that Peterson would be convicted of murder, so payments should have been withheld.

Peterson’s wife died in 2001, and two weeks later Peterson was indicted for her murder.   BNA reports that the wife’s estate made a claim for benefits, but was told by the administrator that Peterson was the beneficiary and, absent a conviction, there was no legal justification for denying distribution of benefits to Michael, according to the court.  

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The estate sued Nortel Networks, the plans, and the administrator under the Employee Retirement Income Security Act (ERISA), claiming it was an abuse of discretion for the benefits to be paid to Peterson.

According to BNA, the court brought up North Carolina’s “slayer statute” in its opinion, which says   a person convicted of killing is barred from acquiring any property or receiving any benefits resulting from the victim’s death.   The court determined that, “If a pending judicial determination could serve to bar a distribution to a particular beneficiary, it reasonably follows that there is a fiduciary responsibility to delay the distribution to that person until a judicial determination regarding the beneficiary’s ability to receive plan benefits had been made.”

Two years after his indictment, Peterson was convicted of his wife’s murder.

The case isAtwater v. Nortel Networks Inc., M.D.N.C., No. 1:04CV00503, 9/6/05.

Compliance September 13, 2005

Illegal Alien Covered Under Worker's Comp

September 13, 2005 (PLANSPONSOR.com) - Maryland's Supreme Court ruled that an illegal alien injured on the job is deemed a covered employee eligible for workers compensation benefits under Maryland law.
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Business Insurance reports that in Design Kitchen and Baths vs. Diego E. Lagos, the employer and insurer Princeton Insurance Co. argued that Lagos, injured on the job in 2001, must be denied workers comp benefits because his illegal alien status prohibited him from entering into an employment contract.  

Design Kitchen and the insurer also argued that because Lagos’ claim conflicts with the Immigration Reform and Control Act of 1986, their employment contract is void regardless of whether the employer or employee violated federal law.

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The Maryland Workers Compensation Commission and a trial court both ruled in favor of Lagos, and the Court of Appeals affirmed the ruling.   According to Business Insurance, the appeals court found that, while Maryland’s workers comp law does not specifically address undocumented worker status, it does state that any uncertainty is to be resolved in the claimant’s favor.

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