ERISA Preemption of State Slayer Statutes: Does it Matter?
Over the last decade, courts around the country have been asked to decide whether ERISA preempts state slayer statutes – state laws that prohibit a murderer from collecting benefits as the beneficiary of the victim's estate or as the surviving spouse of the victim under an insurance policy or benefit plan. Courts have come down on both sides of the issue – some finding that ERISA preempts the state law, others holding that the state law governs.
And some courts have decided that the question is moot because, even if the state's slayer statute is preempted, federal common law prohibits a killer from being rewarded for his or her crime as a beneficiary so the outcome is the same. This post will review the current state of the law regarding slayer states as they relate to ERISA plans, and offer some comfort to employers who find themselves having to deal with the issue.
Slayer Statutes
The policy goal served by slayer statutes is clear and compelling. No person who kills another person should realize financial benefit from the crime regardless of a familial or other beneficial relationship between the perpetrator and the victim. To serve that goal, slayer statutes operate by treating the killer as though he or she predeceased the victim. This makes the killer incapable of collecting as a beneficiary, and the proceeds of the insurance policy or pension benefit are paid to whomever is next in line according to the underlying contract or plan document.
Litigation involving slayer statutes can arise in a number of different ways. A family member of the victim may seek to block the killer from receiving payments from the victim's estate. Alternatively, an insurance company or retirement plan sponsor, unsure of whether the state slayer statute should be applied, may bring an action in court (called an interpleader action) and ask the court to determine who the proper beneficiary is. If the source of the payment is an employee benefit plan governed by ERISA, the question of preemption comes to the fore.
ERISA Preemption
Section 514(a) of ERISA explicitly preempts state laws that "relate to" any employee benefit plan. Courts have interpreted this language to mean any state law that refers directly to employee benefit plans, or that bears indirectly (but substantially) on employee benefit plans. For example, state laws that affect the type of benefits an ERISA plan can offer or that require certain claims information to be reported to a state database are preempted. A central purpose of ERISA preemption is to promote national uniformity in the laws governing administration of employee benefit plans, and the Supreme Court has explained that state laws that provide detailed recordkeeping and reporting requirements are preempted because they interfere with uniform plan administration (see, for example, Gobeille v. Liberty Mutual Insurance).
Certain categories of state laws and regulations that could potentially have implications for employee benefit plans are, however, saved from preemption. Specifically, Section 514(b) states that laws regulating insurance, banking, and securities are not preempted by ERISA. State slayer statutes are not creatures of insurance, banking, or securities law. So the question is whether a slayer statute could interfere with uniform plan administration or otherwise impose the type of burden on a benefit plan that supports preemption.
The Egelhoff Case
Although the Supreme Court has never specifically addressed ERISA preemption of slayer statutes, in Egelhoff v. Egelhoff the Supreme Court held that ERISA preempts a state law that revokes beneficiary designations upon divorce. The Court reasoned that the state law interferes with a plan administrator's application of rules for determining beneficiary status and affects the payment of benefits. Because these are core matters of plan administration and interfering in them would disturb nationally uniform plan administration, the Court determined that the law relates to employee benefit plans and is preempted by ERISA.
In Egelhoff, the Court specifically noted that slayer statutes present a different situation because the underlying principle behind slayer statutes is well-established in state law and predates ERISA. Although the Court did not address whether slayer statutes are preempted, several courts, including the Seventh Circuit (see Laborers' Pension Fund v. Miscevic), have cited Egelhoff when concluding that slayer statutes are not preempted.
Decisions by federal courts that have concluded that ERISA does not preempt slayer statutes have focused on the fact that slayer statutes are essentially part of family law – an area that has long been governed by state law. As the Seventh Circuit reasoned, this means that there is a heavy burden on the party arguing for preemption to show that Congress intended to supplant state law. Quoting lower courts, the Seventh Circuit concluded in Laborers' Pension Fund that "Congress could not have intended ERISA to allow one spouse to recover benefits after intentionally killing the other spouse."
Since the Egelhoffdecision, a majority of federal courts that have faced the question have declined to decide whether ERISA preempts slayer statutes, concluding instead that the result is the same whether or not the slayer statute is preempted. This is because if the slayer statute is preempted, federal law controls. And under federal common law, a murdering spouse is prohibited from collecting the proceeds of the victim's insurance policy or pension benefit as a beneficiary.
Federal common law on the issue is deeply rooted and broadly stated: a person cannot profit from his or her wrongful deed. As the Supreme Court said in 1886 in Mutual Life Insurance Company of New York v. Armstrong, "It would be a reproach to the jurisprudence of the country if one could recover insurance money payable on the death of the party whose life he had feloniously taken." As the common law developed, courts made clear that this principle applied not only to life insurance, but to other methods of inheritance, including pursuant to wills.
In general state slayer statutes and the federal common law agree that a person convicted of murder cannot collect as the victim's beneficiary. However, federal common law may not mirror a particular state's law on all issues. In many states and under federal common law, a conviction for reckless homicide will generally trigger the slayer rule. Voluntary manslaughter has also been found sufficient to trigger the rule, but other circumstances, for example, where someone dies as a result of another's exercise of self-defense, will not necessarily bar the killer from receiving life insurance proceeds. In these situations, a close analysis of the applicable state and federal law is required.
What should a plan administrator do?
Until the Supreme Court addresses the issue, or a consensus builds among the federal appellate courts, there can be no definitive answer as to whether ERISA preempts state slayer statutes. This means that insurers and plan administrators outside the Seventh Circuit may be left wondering what law to follow. For some, if the stakes are high enough, the safest approach will be to bring an interpleader action and ask a court to identify the proper beneficiary.
In most cases, however, it would not be unreasonable to conclude that the question is moot and the proper beneficiary will be someone other than the killer, regardless of whether state or federal law applies. In these cases, insurers and plan administrators can refuse to pay benefits to the killer, and look to the policy or plan document for an alternative beneficiary.
In all cases, insurers and plan administrators should take care to closely review the facts of the situation and the specifics of state and federal law. Particularly in nuanced cases, such as those involving negligent homicide or a successful insanity defense, the details as to whether a person is precluded from recovering as a beneficiary may differ between a state's slayer statute and the federal common law. In these cases, consultation with knowledgeable legal counsel will be helpful. And, as always, proper documentation of the process followed by the insurer or plan administrator, is strongly recommended.
