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Supreme Court Decides Plan Beneficiary Designation Overrides Divorce Decree
Plan administrators may now feel secure in following participant directions on death benefits regardless of conflicting divorce decrees or state laws. The United States Supreme Court on January 26, 2009 held that a former spouse's waiver of her interest in her ex-husband's retirement benefit did not override the terms of the plan that required the participant to designate a beneficiary (
Kennedy v. Plan Administrator for DuPont Savings and Investment Plan). The divorce decree containing the waiver did not qualify as a qualified domestic relations order and thus did not override the participant's written beneficiary designation form.
The participant had failed to revoke the designation of his former spouse as the beneficiary under the plan prior to his death. Therefore, the former spouse was entitled to the death benefit under the plan upon the death of the participant, even though she had actually waived it in the divorce decree.
Key Implications:
Plan administrators may rely on the beneficiary designations in their files in deciding to whom to pay death benefits unless there is an overriding qualified domestic relations order. However, a plan administrator may want to routinely review its beneficiary designation records and warn participants to update their beneficiary designation forms if their family circumstances change. Plan sponsors should review their plan documents to ensure that the death benefit provisions are clear and unambiguous. Plan sponsors may also want to consider adding a plan provision that automatically revokes a beneficiary designation of an ex-spouse upon the entry of a
divorce. Finally, summary plan descriptions should be revised to make sure that participants are well informed about the importance of keeping their beneficiary designations up to date.
For more information about the Supreme Court case, please contact Melissa Proffitt Reese, Chris Sears or your
Ice Miller LLP employee benefits attorney. | 