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Generally, the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.S. § 1001 et seq., preempts all state laws insofar as they may now or hereafter relate to any employee benefit plan which is subject to ERISA. 29 U.S.C.S. § 1144(a). The Supreme Court has set forth a two-part inquiry for determining whether a state law "relates to" an employee benefit plan for purposes of 29 U.S.C.S. § 1144(a). According to the Court, a state law "relates to" an ERISA plan if it has (1) a connection with or (2) reference to such a plan. A state law has "reference to" an ERISA plan where it acts immediately and exclusively upon ERISA plans, or where the existence of ERISA plans is essential to the law's operation. The Illinois doctrine of substantial compliance applies generally to life insurance policy beneficiary designations, and accordingly does not have "reference to" an ERISA plan for purposes of preemption.
Jimmie Johnson was an employee of General Electric ("GE") from 1968 until his death on February 15, 1999. During his employment, he was a participant in the GE Life, Disability and Medical Plan (the "Plan"), an employee welfare benefit plan governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. Johnson designated his then-wife as sole beneficiary but completed a beneficiary designation form naming appellees. When Johnson died and both parties sought to recover under the plan, the insurer, Metropolitan Life Insurance Company ("MetLife"), filed its interpleader action. The only issue before the reviewing court was whether, as a matter of law, the insured effectively changed his designation by executing the change of beneficiary form. The former wife argued that the court should apply the Illinois doctrine of substantial compliance. Appellees argued that ERISA preempted state law, and, therefore, urged the court to apply federal common law to resolve the dispute.
Did Johnson, as a matter of law, effectively change his designation by executing the change of beneficiary form?
The court agreed with appellees' argument and held that ERISA preempted the state law doctrine of substantial compliance. The court applied federal common law, which held that the court had to look at whether the insured evidenced his intent and attempted to effectuate the change by undertaking positive actions. The court concluded that Johnson met the criteria for changing his beneficiary designation on his life insurance policy.