When a 401(k) beneficiary designation form contains a technical error—such as an incorrect last name—but also includes a perfectly matching Social Security number that would allow an ERISA fiduciary to determine who the rightful beneficiary is if it exercised a bit of dilligence, who is the legal beneficiary? Can a simple error invalidate a participant’s clear intent and divert life-changing assets to their estate? These are important questions.
A recent federal court case, Kostomite v. Kimberly-Clark Corp., from the U.S. District Court for the Eastern District of Pennsylvania, addressed this exact question with a resounding “no.” The court’s ruling, which strongly affirmed the decedent’s clear intent over a minor error, provides a critical lesson in how disputes over survivor benefits are resolved under the Employee Retirement Income Security Act of 1974 (ERISA).
This case highlights a frequent and costly battleground. When plan administrators face potential competing claims, they often file a legal action called an interpleader. This procedure forces the rival claimants (in this case, the decedent’s long-time partner and his estate) into a federal lawsuit to prove their right to the funds. It is a tool that ERISA fiduciaries use to avoid their fiduciary obligation to fully and fairly adjudicate claims.
While the judge in Kostomite found the decedent’s intent “inescapably obvious,” the case still required litigation. This demonstrates the critical importance of hiring an experienced ERISA attorney. A knowledgeable attorney can navigate the complexities of federal benefits law, dismantle “fanciful” legal arguments from opposing parties, and build the strongest possible case to affirm a participant’s clear wishes and secure the benefits you are rightfully owed.
The Case of the Contested 401(k): Kostomite v. Kimberly-Clark Corp.
The facts of the Kostomite case are straightforward. The decedent, Mr. Bill Teetsel, worked for Kimberly-Clark and participated in the company’s 401(k) & Profit Sharing Plan. For over twenty years, Mr. Teetsel was in a committed, long-term romantic relationship with Ms. Kostomite. They lived together for many years, but they never legally married.
The Kimberly-Clark plan had a crucial rule regarding beneficiaries:
- If a participant was married, their spouse was the automatic beneficiary of the plan’s survivor benefits, regardless of who was named on the form.
- If a participant was unmarried, they were free to designate any beneficiary they chose.
Mr. Teetsel, being unmarried, properly exercised his right to name a beneficiary. On the form, he designated “Sophie Teetsel.” Critically, alongside this name, he also provided the beneficiary’s Social Security number and date of birth. These identifiers were a perfect match for his long-time partner, Ms. Kostomite. Evidence even showed that Ms. Kostomite occasionally used the last name “Teetsel” in social settings, such as at a local swim club.
Upon Mr. Teetsel’s passing, Ms. Kostomite sought to claim the 401(k) benefits. However, the decedent’s estate also filed a claim for the funds, arguing that Ms. Kostomite was not the person named on the form.
Faced with two competing claims, the plan administrator, Kimberly-Clark, did what many plan administrators do in this situation: it filed an interpleader without adjudicating which of the claimant’s was entitled to the benefits.
What is an Interpleader? (And Why It Matters)
For prospective clients and referring attorneys, understanding the mechanism of an interpleader is key. An interpleader is a legal action filed by a “stakeholder”—in this case, the Kimberly-Clark 401(k) Plan—that holds funds or property for which it faces multiple, conflicting claims.
Instead of trying to decide who is right (and risking being sued by the party it doesn’t pay), the stakeholder essentially turns to the court and says, “We hold this money, but we don’t know who to pay. We are depositing the money with the court. Please have the rival claimants argue their case, and you, the Court, tell us who legally deserves it.” There are many instances where this is a reasonable approach; however, the interpleader mechanism does not absolve an ERISA fiduciary of its obligation to fully and fairly adjudicate claims for benefits when it can do so. Thus, ERISA fiduciaries have to be careful not to simply abdicate their fiduciary duty. Part of being a fiduciary is sometimes making challenging decisions.
Nonetheless, the interpleader procedure protects the plan administrator from double liability. For the claimants, however, it means the beginning of a federal lawsuit. The plan administrator deposits the contested funds into the Court’s registry and is typically dismissed from the case, leaving the two claimants (here, Ms. Kostomite and the Estate) to litigate against each other for the benefits. This is precisely what happened in Kostomite.
The Estate’s “Absurd” Argument and the Court’s Clear Ruling
In Kostomite, the Court was plainly disappointed with the fiduciary’s obvious and cowardly failure to adjudicate Ms. Kostomite’s straightforward claim. The Estate’s entire argument hinged on the name discrepancy. It argued that because Ms. Kostomite’s legal name was not “Sophie Teetsel,” she could not be the beneficiary. The Estate then offered what the Court described as a “fanciful” and “absurd” alternative theory: that by naming “Sophie Teetsel,” the decedent was creating “a qualifier, a requirement” that Ms. Kostomite would only receive the funds if they were married.
The federal judge, Hon. Gail Weilheimer, swiftly dismantled this argument. First, the judge pointed out the glaring logical flaw: the plan automatically voided non-spousal beneficiary designations if the participant was married. If Mr. Teetsel and Ms. Kostomite had been married (as the Estate’s “qualifier” theory required), the designation form would have been irrelevant, and the benefits would have gone to her automatically as the spouse. The Estate’s argument was, therefore, self-defeating and “nonsensical.” Second, and most importantly, the court looked to the decedent’s clear intent. ERISA requires plan fiduciaries to act “in accordance with the documents and instruments governing the plan.” Here, the plan documents included the beneficiary designation form. The court found it “inescapably obvious” that Mr. Teetsel intended to name Ms. Kostomite.
The use of her correct Social Security number and date of birth made his intent “entirely unambiguous.” The minor name error, the court reasoned, was virtually irrelevant in the face of such specific, corroborating data. The judge concluded that “the only logical conclusion… is that the Decedent, in his own mind, thought of Plaintiff as his spouse and referred to her as having his name.”
The court granted summary judgment to Ms. Kostomite, finding that no reasonable jury could ever conclude otherwise and that the Estate’s theory was “rank speculation” in an attempt to gain a windfall.
Key Lessons from an ERISA Attorney
The Kostomite case was, in the judge’s own words, “so obvious from the outset.” However, this clarity came only after a federal lawsuit was filed. Ms. Kostomite still had to endure the stress, time, and expense of litigation to secure the benefits that were clearly intended for her.
As ERISA attorneys, we see several critical lessons for plan participants and their loved ones:
- Precision is Your Best Defense: While Ms. Kostomite ultimately prevailed, this entire lawsuit could have been avoided. Always use the full, current legal name of your beneficiary on all designation forms.
- Identifying Information is Powerful: The decedent’s decision to include Ms. Kostomite’s Social Security number and date of birth was the saving grace. This unique data made his intent undeniable. Never leave these fields blank.
- Review Your Designations Regularly: Life changes. People get married, divorced, or have children. A beneficiary designation from 20 years ago may not reflect your current wishes. Review your 401(k), life insurance, and pension beneficiaries every few years or after any major life event.
- Understand Your Plan’s Rules: Mr. Teetsel understood that as an unmarried participant, he had the right to name his partner. Many people mistakenly believe a will can override a plan’s beneficiary designation. It cannot. ERISA plan documents almost always supersede a will.
How The Garner Firm Handles Complex ERISA Disputes
While the Kostomite case was straightforward, the vast majority of ERISA disputes are not. These cases are governed by a complex web of federal laws and regulations. They often involve ambiguous plan language, competing medical opinions (in disability cases), or allegations that a plan fiduciary breached its duties.
At The Garner Firm, our attorneys have extensive experience navigating the complexities of ERISA litigation. We represent participants, beneficiaries, and spouses in a wide range of benefit disputes, including:
- Contested survivor benefits and life insurance claims.
- Denials of long-term disability benefits.
- Pension miscalculations and eligibility disputes.
- Breaches of fiduciary duty by plan administrators.
We understand the tactics plan administrators use to deny or delay claims, and we are prepared to fight for our clients’ rights at every stage, from administrative appeals to federal court litigation. We also frequently partner with referring attorneys from trust and estate, family law, or personal injury practices who encounter complex ERISA issues that fall outside their typical scope.
Contact The Garner Firm Today
If you or a client are facing a dispute over ERISA benefits, you do not have to face the insurance company or plan administrator alone. The law is on your side, but it is complex.
Contact The Garner Firm today for a consultation. Our experienced ERISA attorney team is ready to analyze your case, explain your rights, and develop a strategy to secure the benefits you are rightfully owed.