Advisory Committee of the MTS Systems Corporation Retirement Savings Plan and…

Background

Richard Nelson participated in the MTS Systems Corporation Retirement Savings Plan and Trust, an employee retirement plan governed by the Employee Retirement Income Security Act (ERISA). The plan provided that his wife, Linda L. Nelson, would be the account beneficiary unless Richard made a valid different designation and Linda validly consented to it.

On November 6, 2019, Richard signed a beneficiary-designation form naming Rachel M. Swanson as the sole beneficiary of his approximately $3 million retirement account. Linda signed a spousal-consent waiver. Richard died on November 9, 2019. Swanson claimed the account, while Linda challenged the beneficiary change, asserting that Swanson used fraud and undue influence to obtain Linda’s consent.

The plan’s Advisory Committee initially denied both women’s claims. After reviewing submissions from both, the Committee concluded that Linda’s consent was invalid because of undue influence and misrepresentation by Swanson. It reversed its denial of Linda’s claim and upheld its denial of Swanson’s claim. The Committee then brought this interpleader action to confirm its decision. Swanson filed a crossclaim seeking a declaration that she was the beneficiary. Linda moved for summary judgment, which asks the court to rule without a trial when no genuine dispute of material fact exists and the movant is entitled to judgment as a matter of law.

Standard of Review

The plan gave the Committee discretionary authority to decide eligibility and interpret plan terms. The court therefore reviewed the Committee’s decision for abuse of discretion, meaning whether the decision was unreasonable or unsupported by substantial evidence. The court rejected Swanson’s argument that the Committee failed to conduct a full and fair review. It held that even evidence showing Richard intended Swanson to receive the account would not resolve the case because Linda’s valid spousal consent was required.

Undue Influence

The Committee applied six nonexclusive factors to determine whether Swanson unduly influenced Linda’s consent. The court upheld the Committee’s conclusions that:

- Linda was under extreme stress because she believed Richard was near death; he died three days after she signed the waiver. - Linda did not receive disinterested advice about signing the form and relied on Swanson for various daily tasks. - Swanson played a central role in procuring the benefit by preparing estate-planning materials naming herself as a beneficiary, completing the beneficiary form, driving Linda to the notary, showing Linda trust-related materials, and mailing the form to T. Rowe Price. - Although Linda did not allege direct coercion, the Committee reasonably found that Linda’s stress and Swanson’s actions pressured Linda to sign. - It was not necessarily unnatural for Richard to leave assets to Swanson, given his financial generosity toward her, but it was unnatural for Linda to give Swanson Richard’s entire retirement account. - The evidence did not show that it would have been natural for Linda to give the account to Swanson.

The court also concluded that the Committee reasonably assessed conflicting testimony by relying on relevant third-party evidence, including medical records, the testimony and notes of an attorney involved in Richard’s estate planning, and affidavits from the notary.

Disposition

The court held that the Committee’s decision was reasonable and supported by substantial evidence. It determined that Linda’s spousal-consent waiver was invalid and that, under ERISA, Linda was the rightful beneficiary of Richard’s retirement account. Judge Paul A. Magnuson granted Linda L. Nelson’s Motion for Summary Judgment and ordered that the matter be dismissed with prejudice.