Marriage after designation of death beneficiary

[J Simmons]

H divorces W1.  H names children from W1 as death beneficiaries of his 401k plan benefits.  Then, H marries W2.  Three years later, H dies.

Does W2 have any spousal rights to the death benefits? I.e., does H's later marriage to W2 trump his previously having named the children as death beneficiaries?

[Belgarath]

Generally, yes. But if the children were required to remain the named beneficiaries under the terms of a QDRO or court order then the children may still be the beneficiaries of at least part of the benefit. Since you say H was married to W2 for 3 years, then the "one year marriage rule" wouldn't apply, if the plan even uses it.

[Bri]

I would think she has ALL the rights.  Of course, a reading of the plan document is in order.

[Ebplans]

The Eglehoff case says the plan document controls.  I also suspect that the plan says that the person to whom the participant was married at the time of his death is his beneficiary.  I have not reviewed or thought about a QDRO as suggested above, but if it isn't your facts, you don't have to worry about it.

[fmsinc]

The Plan Administrator is required to pay out the 401(k) to the named beneficiary.  See the Supreme Court case of Kari E.  Kennedy, Executrix v.  Plan Administrator for Dupont Savings and Investment Plan, 129 S.Ct. 865 (2009) which you can find at -
http://scholar.google.com/scholar_case?case=9882751476618008595&q=kennedy+dupont&hl=en&as_sdt=4,60

The factual statement does not say that the former spouse has a QDRO giving her rights to the 401(k) - so she is out of the picture, and the existing spouse does not have any superior rights in the 401(k) just by virtue of her being the surviving spouse.  But neither would matter since ERISA does not give a spouse an automatic right to be the beneficiary of a 401(k).  The Plan documents may make the spouse the default beneficiary, but that would be superseded by the actual beneficiary designation.    

Don't confuse the ERISA requirements with respect to QJSA and QPSA that are applicable only to defined benefit plans.  

If you have it, please post statutory or case law providing that a still married widow (not former spouse)  is entitled to be the beneficiary of a defined contribution plan when the decedent has named another beneficiary.  

  

[ESOP Guy]

Doesn't 401(a)(11)(B)(iii) make the spouse the default beneficiary in a PSP? 

Quote

(B)Plans to which pargraph applies.—This paragraph shall apply to—

(i)any defined benefit plan,

(ii) any defined contribution plan which is subject to the funding standards of section 412, and

(iii) any participant under any other defined contribution plan unless—

So, I don't see how the current spouse doesn't have a right to the benefit unless there is a QDRO issue.

[Doc Ument]

I agree with my immediate predecessor responder. I respectfully dissent a whole lot from at least one of the prior commentators.

First, the QJSA/QPSA provisions must be used by every pension plan, i.e., both DB and money purchase DC plans. Second, the QJSA/QPSA provisions must be used for any other plan (i.e., profit sharing plans) unless the drafter takes advantage of the exception granted to such plans by drafting the plan to contain (or the AA option election that activates) the three conditions stated in the regulation for the profit sharing plan to be exempt from the QJSA/QPSA rules. The first condition is that 100% of the participant's account balance is the spousal death benefit. Both of my enumerated statements are right out of the first sentences of Regulation 1.401(a)-20 Q&A#3.   You should try to find the "no-QJSA/QPSA" provisions in the plan.  If you have a DC basic plan document with a QJSA/QPSA Section, and you do not see that non-QJSA/QPSA language in that Section, then there will be another Section with those provisions, and in that case, there should also be an AA option referring to the latter Section, and which would need to be selected if there was to be no QJSA/QPSA).   For the basic plan document, a good search term is "412" because the plan most likely mimics the regulation, i.e., "for plans not subject to 412,..."   The regulation is copied below.

That means that for profit sharing rule that contains the three provisions in the cited regulation for the account balance to be free of the QJSA/QPSA rules, the new spouse is the beneficiary unless that spouses waives his or her right to 100% of the participant's account balance.  I agree with the statement that 100% of all death benefits must go to the beneficiary, but the term "beneficiary" will be defined by the plan to first confer spousal benefits and then refer the employer to examine the designation form if the spouse has so consented to non-spouse beneficiaries. It sounds like the participant made the assumption that the old designation would survive. Not so. Just like participants should re-do designation forms immediately upon divorce (so as not to inadvertently leave their ex as still being the beneficiary they specifically designated), they should re-do them immediately upon marriage, at least if there are to be non-spouse beneficiaries. In the absence of a QDRO saying otherwise, the old designation form must yield to the language in the PS/K plan that likely states something along the regulatory lines of:

(1) The plan provides that the participant's nonforfeitable accrued benefit is payable in full, upon the participant's death, to the participant's surviving spouse (unless the participant elects, with spousal consent that satisfies the requirements of section 417(a)(2), that such benefit be provided instead to a designated beneficiary);

 

(2) The participant does not elect the payment of benefits in the form of a life annuity; and

 

(3) With respect to the participant, the plan is not a transferee or an offset plan. (See Q&A 5 of this section.)

 

[Luke Bailey]

J Simmons, as explained across several answers above, I would be confident that if you carefully review the plan provisions and maybe the beneficiary designation form, they will say that the spouse (i.e., #2) is the beneficiary for all of the account. The only other option is that the plan had a J&S and a QPSA for at least 50% of account, and that is almost never the case.

Of course, if spouse 1 or the children have a QDRO, that should trump.

[QDROphile]

See ESOP Guy.

And the plan document should state the legal requirement. 

[loserson]

Agree with the consensus.  Read the plan document, but if there is no QDRO, then the second spouse had to consent to waive.  If she did not, she displaced the designated beneficiaries upon marriage, by operation of law.

Another interesting question would be: what would happen if the second spouse had also divorced?  Does the prior designation reassert itself?  Does the second ex remain the beneficiary as she was during marriage?  Assuming the plan is silent, and that the participant never explicitly designated the spouse as beneficiary, and did not make any election naming her, then my inclination is that the earlier designation becomes effective again.  In other words, that it was superseded by his second marriage, but if he is no longer married then it is no longer superseded.

Has anyone seen guidance on this point?  Not sure if there is better guidance here than Treas  Reg §1.401(a)-20, Q/A-25(c), which is fairly vague.