Ex-spouse named as beneficiary

[2muchstress]

Participant named spouse as beneficiary when he initially enrolled in plan 8 years ago. He divorced approximately 2-3 years ago and never changed beneficiary. Remarried in January and passed away last Wednesday.

Account balance is nearly 30K, so worth some discussion. Am I correct in saying that the named beneficiary (ex-spouse) gets the $$$$?

[Mike Preston]

You should probably get to an attorney in advance of being contacted by the widow. While I *believe* that the terms of the beneficiary designation will ultimately be the ones that the plan follows, there are a number of questions that all sides will no doubt want to have answered before the final decision is made. If you already have your ducks all lined up, the process may go smoother. The biggest issue, of course, will be whether the beneficiary designation you have was valid when executed. If i were the widow, I'd want to confirm or deny that one first. Then there is the potential that the divorce decree invalidated the designation in some manner. Probably not, but then again.....

There are probably other issues to deal with, such as those that might be specific to your circuit court.

In any event, if anything ever called out for the need of an attorney to advise a Plan Administrator, this is it.

[2muchstress]

Mike,

When you say that we should confirm that the bene des form was "valid when executed", what do you mean? What would make a bene des form not valid, other than not being signed?

[Mike Preston]

Failure to provide a designation form that conforms to the rules of the plan? Dated improperly? Improper spousal consent? I don't know? All I know is that I would want an attorney telling the Plan whether it appeared to be valid or not!

[2muchstress]

Thanks. I agree that this is a matter for an attorney. The reason that I asked the previous question was because the bene des form was not dated. I am not sure if a date is really a necessity or not, unless there were multiple forms (which in this case there isn't).

[Guest PAL100759]

Mike P. - I'm confused.

I thought that the current spouse was always the considered the plan beneficiary regardless of the beneficiary designation on file unless the current spouse provided written consent to an alternate beneficiary. Has something in the law changed?

In other words, since the participant was married to spoiuse number two at the time of death, number two would automatically be the beneficiary of plan benefits unless (a) spouse number two waived their right to the benefits and permitted spouse number one to be named beneficiary, or (B) there is a QDRO in effect that gives spouse number one rights to the plan benefits. I myself have never seen spouse number two sign off on having spouse number one as beneficiary.

PAL

[pmacduff]

My vote goes with PAL100579, I always understood that the spouse was the beneficiary unless a waiver was obtained. (Although I don't know that a divorce would negate a prior designation.) It seems to me that we have seen past discussions on these very boards and in articles which indicate that some courts have found in favor of the beneficiary on the beneficiary designation form. It would be interesting to see how this turns out!

[david rigby]

Try this thread: http://benefitslink.com/boards/index.php?showtopic=15664

[2muchstress]

Interesting. We obviously have opposing opinions on the matter. We have similar situation with another client, and the ERISA attorney is advising that benefits go to named beneficiary.

My understanding that the spouse is automatically a beneficiary unless waiving that right is a concept of community property, and would then be left up to state law. However, ERISA issues would preempt any state law, and thus negate that particular concept.

However, Mbozek mention on a previous thread something about ERISA stating that the spouse must be beneficiary. I cannot find anything to that effect. If anybody has a link, that would be great.

Thanks again.

[jpod]

I agree with PAL100759, assuming this is an ERISA-governed plan. If this is an ERISA plan, this seems to be a no-brainer: spouse #2 gets the money, unless she expressly consented to the designation of some other beneficiary.

2Muchstress: Is there some fact here we are not aware of? Is the employer a governmental employer? If so, what does the plan say about beneficiary priorities, spousal preferences, etc.?

[E as in ERISA]

And if that seems unfair to the first spouse because he was married to her for 5 years and the second one for only 6 months....well, the first spouse should have obtained a QDRO at the time of divorce!

[2muchstress]

This is an ERISA plan. Our firm's action was to refer client to an ERISA attorney.

What most of you are saying is that a marriage will automatically negate any prior beneficiary designation.

I am not sure if it matters, but the participant was only married to spouse #2 for 7 months before he died. What implications, if any, would the length of this marriage have on the determination of who gets the money.

[KJohnson]

Be sure to look at the link in Pax's post. You need to see if your plan has the "one year rule" with regard to who is a spouse. It looks lilke the spouse here does not meet the rule if it is in your plan.

[jpod]

Can you have a one-year rule in a defined contribution plan that is NOT subject to the J&S requirement? (I don't think so.)

[KJohnson]

I just checked two adoption agreements for 401(k) prototypes. Both mandate the one year rule for non-QJSA Plans.

In other words these plan state that for the "profit sharing plan exception" to the QJSA /QPSA rules the spousal consent requirement to designation of an alternat beneficiary does not apply if the spouse and the participant have been married less than one year prior to death.

Also looked at the volume submitter for a 401(k) and the one year rule is an option (even for non-QJSA plans).

[jpod]

I checked the regs under 401(a)(11) and see that I was wrong. A dc plan not subject to the j&s rules may have a one-year rule before the spousal preference kicks in.

So, if 2Muchstress' plan uses the one-year rule, we're back to square one, in which case someone needs to study the beneficiary designation and determine if the money goes to the ex-spouse or if there is something funky in the designation that would raise a question in that regard. (For example, maybe the designation should be interpreted as making the ex-spouse the beneficiary only for so long as they were married. This type of interpretative question comes up in wills all the time.)

If 2Muchstress' plan does not use the one-year rule, spouse #2 gets the money.

[Mike Preston]

There is just too much we don't know. Another thought is the one-year rule. This individual wasn't marrited for the full year when taken away. Does that impact the determination? I like the question about whether it is a governmental plan. Another thing to consider. Again....call an attorney!

I guess the alternative would be to plan on submitting the whole thing to the court for a determination. Inter plead it and let the court decide? I don't know. Maybe you need to call an attorney to decide whether that is a viable option or not!

[mbozek]

Before anyone runs to court has any one thought this issue though. Assuming the 0ne year rule applies (and I am not saying it does) what happens next. According to a US Supreme ct decision, if there is no spousal beneficary then the beneficiary is to be determined under the terms of the plan document. Most plan documents provide that if there is no designated beneficiary then the default beneficary is either the spouse or the estate of the deceased. Suggest that the plan document be read.