Auto-Revocation Clause in Plan if Later Divorce Spouse Enforceable

[Charles]

Are there any cases which support an auto-revocation upon divorce clause in a 401(k) plan as it pertains to a named spouse beneficiary?

[RatherBeGolfing]

Can you be more specific about what you are looking for?  Qualified plans can include language that automatically revoke a beneficiary designation upon a state event, like divorce.  The IRS has said that while plans can auto-revoke on divorce, it may be problematic to auto-revoke on legal separation.  

See Employee Plan News Issue 2013-3

Are you looking for case law that specifically says that a plan CAN auto-revoke?  Most cases I have read on it deal with whether something other than the plan is enough, like waiving the right to benefits in the divorce decree without actually changing the beneficiary designation,  or a state law that auto-revokes a benefit upon divorce.

 

[Luke Bailey]

Charles, if RatherBeGolfing is correct in his description of what you have in mind, there may be cases, but I am unaware of them. Actually, I vaguely recall that there may have been one in the last two or three years, but not sure. I have routinely put those provisions in plan documents and beneficiary designation forms for 30 years, so I hope they work.

Why wouldn't they work? We know from SCOTUS that ERISA generally trumps state family law as to who takes a deceased participant's account. We also know that the form and content of beneficiary designations are not specified by the Code or ERISA, except for provisions related to spousal consent. So if a plan is going to permit someone to name someone as beneficiary, on a form that it provides, why wouldn't it be able to set reasonable conditions on that if they are consistent with the spousal consent requirements of ERISA and Code?

A rule that autorevokes a beneficiary designation naming the spouse, in the case of the participant's subsequent divorce from that spouse, seems eminently reasonable. I am sure that in over 90% of cases, participants who proactively name their spouse as beneficiary do so not understanding that they would have the same result by doing nothing, which would simply trigger the plan's provision for default beneficiaries, which generally, as required by ERISA and Code would have the surviving spouse as default.

[Charles]

My dilemma is that the plan administrator chose the spouse as the death beneficiary when the plan under which she was named had an automatic revocation clause,  Subsequent plan (which had a no carry-forward of beneficiary notice) held that DB gets the benefits.  The administrator took this to mean that she could ignore the automatic revocation language in prior plan (where spouse was primary beneficiary).  Thank you for any cases which discuss.  

[Charles]

It seems that the Plan Language automatically revoking a spouse upon a later divorce would control.  I was hoping to find a case on point.  It may be a bit too obvious to be taken up by a Court since Kennedy v. Dupont clearly dictates that clear Plan language will control.  

Thank you for any case references you may know of.