Following a 401(k) plan participant’s death, his adult children challenged the plan’s distribution of his $3 million benefit to his wife. The participant had designated the children as beneficiaries after his first wife’s death, but several years later, he remarried. The beneficiary designation form stated that designations would be automatically revoked upon a subsequent marriage, making the new spouse the beneficiary absent submission of an updated form reflecting the spouse’s waiver of beneficiary rights (as required under ERISA and the Code). The rule that marriage voids a previous beneficiary designation was set forth in the formal plan document as well as multiple summary plan descriptions (SPDs) provided to the participant over the years. The quarterly account statements sent by the plan’s trustee, however, continued to list the children as beneficiaries and did not mention the spousal beneficiary provision. The children asserted that the employer/plan sponsor, the plan’s benefits committee, and the trustee breached their ERISA fiduciary duties by failing to adequately inform the participant of the spousal beneficiary and waiver requirements. After the trial court dismissed the claims against the employer and trustee and ruled that the committee had complied with its fiduciary duty, the children appealed.
To dig deeper, visit the original article on the Thomson Reuters blog.