Court Says Spouse Trumps Beneficiary Designation of Children

A federal court has granted retirement plan benefits of a deceased participant to his spouse, even though he had listed his children as beneficiaries on the plan’s designation form.

The U.S. District Court for the Middle District of Louisiana said the plan language is clear that the beneficiary will be a participant’s spouse unless a waiver is signed, and Leonard Kidder had not executed a waiver at the time of his death. The court rejected the children’s argument that the Employee Retirement Income Security Act (ERISA) does not require the consent of a spouse married less than one year in order for a participant to distribute proceeds of a plan to a non-spouse.  

The court noted that because the statute uses the term “may” and not “shall,” it is permissive rather than mandatory, so ERISA allows that some plans may vest rights of spouses immediately upon marriage.  

According to the court opinion, when Leonard Kidder’s first wife passed away, he changed his 401(k) beneficiary designation to his three children. However, he later remarried and passed away six weeks following that marriage.   

The children had also brought state law claims of malpractice and/or negligent misrepresentation against Cajun, accusing the company through Faulk & Winkler, a law firm that provided plan documents and forms to Cajun Industries, of failing to provide accurate and thorough information to participants, specifically about how a subsequent marriage would affect their beneficiary designations. The court ruled these claims were preempted by ERISA.  

The case is Cajun Industries LLC 401(k) Plan v. Kidder, M.D. La., No. 09-267-BAJ-SCR.