For tax professionals and estate planners advising clients on ERISA-governed retirement accounts, the designation of beneficiaries remains a critical area of compliance. The United States Court of Appeals for the Seventh Circuit recently issued a decision in Packaging Corporation of America Thrift Plan v. Langdon, No. 25-1859 (7th Cir. Feb. 2, 2026), addressing the "substantial compliance" doctrine in the context of a post-divorce beneficiary change. This article details the procedural history, factual background, and the panel’s technical analysis regarding why an informal request to change a beneficiary failed to override the plan documents.

Factual Background

The decedent, Carl Kleinfeldt, participated in the Packaging Corporation of America (PCA) Thrift Plan for Hourly Employees (the "Plan"). In 2006, Kleinfeldt designated his then-wife, Dená Langdon, as the primary beneficiary of the Plan, with his sisters listed as contingent beneficiaries. The Plan documents explicitly provided the method for changing beneficiaries: "You should keep your beneficiary designation and your beneficiary’s address up to date. To do so, contact the PCA Benefits Center at [a designated phone number] or you can update your beneficiaries online".

Kleinfeldt and Langdon divorced on September 21, 2022. Following the divorce, a Qualified Domestic Relations Order (QDRO) was executed, allocating a specific portion of the retirement funds to Langdon, which the Plan distributed. On October 4, 2022, Kleinfeldt instructed his secretary to fax a request to the PCA Benefits Center asking the Plan to "remove [his] former spouse" from his insurance and "as a beneficiary from [his] 401k, pension[,] and life insurance accounts".

While PCA removed Langdon from the insurance plans and updated her status to "ex-spouse" regarding the retirement account, they did not remove her as the primary beneficiary. Kleinfeldt died on January 16, 2023, without taking further action.

Procedural History and Requests for Relief

Following Kleinfeldt’s death, both Langdon and Kleinfeldt’s Estate (represented initially by his sister, Terry Scholz) filed competing claims for the retirement proceeds. The Plan filed an interpleader action under Federal Rule of Civil Procedure 22, depositing the funds with the court and dismissing itself from the action.

The district court joined the Estate of Terry Scholz (the contingent beneficiary who passed away during litigation) as a necessary party. Reviewing cross-motions for summary judgment, the district court ruled sua sponte in favor of Scholz’s Estate. The lower court reasoned that Kleinfeldt’s October 4 fax constituted "substantial compliance" with the Plan’s terms, effectively removing Langdon. Langdon appealed this decision, seeking summary judgment in her favor.

Legal Analysis: Standard of Review and the Kennedy Doctrine

The Seventh Circuit reviewed the district court’s grant of summary judgment de novo. A threshold issue involved the impact of the Supreme Court’s decision in Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285 (2009). Langdon argued that Kennedy, which emphasized strict adherence to plan documents, "vitiated the federal common law doctrine of substantial compliance".

The panel noted that while Kennedy requires plan administrators to act in accordance with governing documents to ensure simple administration, the doctrine of substantial compliance may survive in interpleader actions where the administrator has not exercised discretion. The court observed that "the need for the straightforward administration of plans and the avoidance of potential double liability—while central to the Supreme Court’s decision in Kennedy, are not implicated" when the funds are deposited with the court. Ultimately, the court chose to "assume without deciding the continued viability of the substantial compliance doctrine," reasoning that Langdon would prevail even if the doctrine were applied.

Application of the Law: The Substantial Compliance Test

The Seventh Circuit applied the federal common law substantial compliance test, which requires showing that the insured: "(1) evidenced his intent to make the change and (2) attempted to effectuate the change by undertaking positive action which is for all practical purposes similar to the action required by the change of beneficiary provisions of the policy".

Element 1: Intent

The court found the first element satisfied. Kleinfeldt’s fax unequivocally stated his desire to "remove my former spouse... as a beneficiary of my 401(k)". The court rejected Langdon’s argument that Kleinfeldt’s request for "necessary paperwork" indicated a lack of finalized intent, noting that "substantial compliance does not require the participant to believe they have completed every step in the process".

Element 2: Positive Action

The reversal hinged entirely on the second element: positive action. The court distinguished this case from prior rulings such as Davis v. Combes, 294 F.3d 931 (7th Cir. 2002) and Metro. Life Ins. Co. v. Johnson, 297 F.3d 558 (7th Cir. 2002). In those cases, the decedents had utilized the correct forms or procedures but failed due to minor clerical errors (e.g., failure to sign or date, or incorrect addresses).

In contrast, Kleinfeldt "did not even attempt to utilize the proper procedures" mandated by the Plan, which were to call the Benefits Center or update the beneficiary online. The court emphasized that "Nowhere in the plan documents is the participant allowed to request a beneficiary change via fax".

Key Explanation for Overturning the District Court

The panel provided a distinct explanation for why the district court’s application of the substantial compliance doctrine was erroneous. The court held that Kleinfeldt’s method of communication—a fax—deviated materially from the Plan’s requirements. The court stated: "the manner Kleinfeldt chose to remove Langdon as a beneficiary evidences much more than ‘careless error’... it is a method that deviates materially from the Plan’s terms and falls short of being ‘for all practical purposes similar to’ the procedures required by the plan documents".

Furthermore, the fax itself acknowledged that further action might be required, as Kleinfeldt requested the Plan to "fax [him] any necessary paperwork... that [he] may need to complete". The court noted that "This suggests that, although Kleinfeldt certainly wanted to remove Langdon as a beneficiary, he himself understood that further steps may have been required to do so. Rather than following up with PCA, however, Kleinfeldt did nothing more".

Conclusion

The Seventh Circuit concluded that Kleinfeldt failed the second prong of the substantial compliance test. Because he did not undertake positive action similar to the Plan’s requirements, his attempt to remove his ex-wife was legally ineffective. The court held that "at his death, Langdon remained the primary beneficiary". The judgment of the district court was reversed, and the case was remanded for entry of judgment in favor of Langdon.

Takeaway for Tax Professionals

This decision reinforces the necessity of strict adherence to plan documents regarding beneficiary designations. A clear written intent, even when communicated to the plan administrator, is insufficient if the participant ignores the specific "positive action" mechanisms (such as online portals or specific forms) dictated by the plan’s governing documents.

Prepared with assistance from NotebookLM.