The need for a divorced individual to look at all of his or her beneficiary designations on his or her retirement plans was made clear this week in a unanimous Supreme Court decision which upheld the beneficiary designation set forth in a retirement plan over the waiver of rights to the retirement plan under a divorce decree. In Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, (decided January 26, 2009), the Supreme Court held that in a qualified retirement plan, the beneficiary designation controls under ERISA, even if the beneficiary, the former spouse of the decedent plan holder, had waived her benefits as part of her divorce from the decedent. Accordingly, if a divorced person neglects to change the beneficiary designations on his or her retirement plans, the divorced spouse may receive an unintended windfall.
We strongly suggest that any person with a retirement plan, whether it is an IRA, 401(k), 403(b) or defined benefit plan, who has divorced or is contemplating a divorce, makes sure that the retirement plan beneficiary designations are changed to reflect his or her intent.