Verify your Retirement Account’s Beneficiary

Verify your Retirement Account’s Beneficiary

The Supreme Court Has Spoken – Verify the beneficiary on your Retirement Account

In a recent case the United States Supreme Court has made it clear, YOU BETTER KNOW WHO IS THE BENEFICIARY ON YOUR RETIREMENT ACCOUNT!  The case dated Jan 26, 2009, titled, Kennedy v. Plan Administrator for DuPont Savings and Investment was decided by the Court unanimously (full opinions for all law geeks HERE).

I have very little interest in getting technical (mainly because I am not an employment law expert and this is not a law blog)  but here are the basics of the case, as quoted from  the United States Supreme Court Wiki,

Consistent with its stated purpose of protecting the rights of employees to receive their retirement benefits, ERISA contains an “anti-alienation” provision—largely intended to protect such assets from creditors—which prohibits the assignment of pension benefits to any individual other than the plan participant. One of the limited exceptions to the anti-alienation provision is the QDRO, which is basically a court order issued in a domestic relations case that assigns retirement benefits to someone other than the plan participant. A QDRO is generally used to assign a participant’s rights to pension plan assets to an ex-spouse as part of the division of marital assets.

William P. Kennedy was an employee at Dupont and a participant in its savings and investment plan (SIP). In 1974, William Kennedy signed a beneficiary-designation form designating Liv Kennedy, his wife at the time, as the SIP’s sole beneficiary. The two divorced in 1994. Pursuant to the divorce decree, Liv Kennedy agreed to forfeit “all right, title, interest, and claim” to William Kennedy’s plan assets. In addition to Liv Kennedy’s divorce waiver, the divorce court also approved a QDRO to disburse William Kennedy’s assets held in non-SIP employment benefit plans, as well as some SIP assets not in dispute in this case. However, a separate QDRO was never submitted for the remaining SIP assets, and William Kennedy never replaced Liv Kennedy as the SIP’s sole beneficiary. After William Kennedy died in 2001, his assets from the SIP plan were distributed to Liv Kennedy pursuant to her designation as the plan’s beneficiary. Kari Kennedy, the daughter of William Kennedy and the executrix of his estate, asked Liv Kennedy to relinquish her rights to the SIP assets. When she refused, the estate filed suit against Dupont, claiming that Liv Kennedy waived her rights to the SIP assets through the previous divorce decree and that Dupont had thus incorrectly distributed the plan benefits.

While the main point of the case is based around a QDRO, which is nothing more than a judgment separating retirement assets, lets take a step back for all those people out there who are single, happily married, or already divorced…

The Supreme Court has made it Clear – VERIFY AND CHANGE IF NECESSARY YOUR RETIREMENT BENEFICIARIES

In this case, an ex-spouse received monies from an account from her ex-husband of over 7 years!  Can you imagine the heartache of family members fighting just because you were too lazy to update a one page form?

I’ll leave you with a Quote from the Court,

The point is that by giving a plan participant a clear set of instructions for making his own instructions clear, ERISA forecloses any justification for enquiries into nice expressions of intent, in favor of the virtues of adhering to an uncomplicated rule: “simple administration, avoid[ing] double liability, and ensur[ing] that beneficiaries get what’s coming quickly, without the folderol essential under less-certain rules.” Fox Valley & Vicinity Const. Workers Pension Fund v. Brown, 897 F. 2d 275, 283 (CA7 1990) (Easterbrook, J., dissenting).

If you want further protection than just naming a person I had previously written a great post on naming trusts as a beneficiary - you may want to check it out.

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