The Dispute Over ESOP and 401(k) Plan Beneficiaries: Ruiz v. Publix

The Dispute Between Arlene Ruiz and Publix Super Markets, Inc.

In the case of Ruiz v. Publix Super Mkts., Inc., 248 F. Supp. 3d 1294 (M.D. Fla. 2017), a legal battle unfolded over the rightful beneficiary of employee benefits following the death of a former Publix employee, Irialeth Rizo. This case, decided by the United States District Court for the Middle District of Florida, Tampa Division, on March 30, 2017, delves into the complexities of beneficiary designations under the Employee Stock Ownership Plan (ESOP) and the 401(k) Plan.

Background of the Case

Irialeth Rizo, a former Publix employee, passed away from cancer on January 19, 2015. During her tenure at Publix, Rizo participated in the company's ESOP and 401(k) Plan. The plans required an initial beneficiary designation via a Beneficiary Designation Card, and any changes to the designated beneficiary had to be made through a similar process. In October 2008, Rizo submitted Beneficiary Designation Cards naming her nephew, Alexander Perez-Vargas, and her nieces, Andrea Vargas and Jessica Vargas, as beneficiaries for both plans.

Rizo's Attempt to Change Beneficiaries

In September 2011, Rizo was diagnosed with cancer. As her condition worsened, she sought to update her beneficiary designations. On January 15, 2015, Rizo called Publix to inquire about the process for changing her beneficiaries. Arlene Ruiz, who was with Rizo during the call, testified that the Publix representative instructed Rizo to write a letter specifying the new beneficiaries, including their Social Security numbers, and to sign and date the letter. The representative emphasized that the cards were not crucial since Rizo was no longer an active associate.

The Letter and Beneficiary Designation Cards

On January 18, 2015, Rizo dictated a letter to Ruiz, who transcribed it. The letter stated Rizo's intention to update her beneficiary to Arlene Ruiz for both the ESOP and 401(k) Plan. Rizo signed and dated the letter, and Ruiz prepared two Beneficiary Designation Cards with her own name and Social Security number. Rizo then sealed the letter and cards in an envelope and asked Ruiz to mail it to Publix's corporate office.

Publix's Response and Denial of Benefits

After Rizo's death on January 19, 2015, Publix received the letter and Beneficiary Designation Cards. However, the cards were not signed and dated by Rizo; instead, she wrote "as stated in letter" on the signature lines. Publix did not process the change of beneficiary, citing the incomplete and unsigned cards. Publix returned the cards to Rizo with a letter explaining the issue, but no further correspondence was received from Rizo.

When Ruiz filed a claim for benefits under the ESOP and 401(k) Plan, Publix denied her claim, stating that the beneficiary designation cards were not properly completed and signed. Consequently, the original beneficiaries named in 2008 remained in effect.

Legal Proceedings and Arguments

Ruiz filed a lawsuit against Publix under the Employee Retirement Income Security Act (ERISA), seeking benefits as Rizo's beneficiary. Publix counterclaimed for declaratory relief, asking the court to declare that the original beneficiaries were still valid. The court had to determine whether the doctrine of substantial compliance applied and whether Rizo's actions constituted a valid change of beneficiary.

Doctrine of Substantial Compliance

The court noted that it was unclear whether the Eleventh Circuit had adopted the doctrine of substantial compliance, which allows for minor deviations from formal requirements if the intent to comply is clear. Even if the doctrine were applicable, its viability after the U.S. Supreme Court's decision in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 555 U.S. 285 (2009), was uncertain.

Court's Decision

The court concluded that without the doctrine of substantial compliance, the last valid beneficiary designations were those received by Publix in October 2008. Therefore, Publix's decision to deny Ruiz benefits under the ESOP and 401(k) Plan was not wrong, and the employer was entitled to summary judgment. The court granted Publix's motion for summary judgment, effectively upholding the original beneficiary designations.

Implications of the Ruling

This case highlights the importance of adhering to formal requirements for beneficiary designations under ERISA plans. The court's decision underscores the necessity of following the specified procedures to ensure that beneficiary changes are valid and enforceable. The ruling also emphasizes the challenges of relying on the doctrine of substantial compliance, particularly in light of recent Supreme Court decisions.

Conclusion

The dispute between Arlene Ruiz and Publix Super Markets, Inc. serves as a cautionary tale for employees and employers alike. It illustrates the critical need for clear and precise documentation when designating or changing beneficiaries under employee benefit plans. The court's decision reinforces the principle that strict adherence to plan procedures is essential to avoid legal complications and ensure that beneficiaries receive the intended benefits.