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Compliance November 7, 2005
Surviving Spouse Rights Supercede Named Beneficiaries
November 7, 2005 (PLANSPONSOR.com) - The US District
Court for the Southern District of Texas has ruled that the
surviving spouse of a participant is entitled to the
participant's benefits though the participant's
ex-wife and sons were originally named as
beneficiaries.
Reported by Rebecca Moore
BNA reports that the court documents state that Jimmy Boulet was married to Terrianne Boulet when he began working for Fluor Corp. After the couple’s divorce in 1992, Jimmy submitted a handwritten beneficiary designation form naming Terrianne and the couple’s two sons as beneficiaries of his pension plans.
Six months after marrying Darlene Boulet, Jimmy submitted an unsigned beneficiary designation form naming Darlene as beneficiary of his retirement plans, BNA reports. When Jimmy died, Fluor paid benefits to Darlene from four Employee Retirement Income Security Act (ERISA)-qualified plans. Since it had received a claim from Terrianne and her sons for Jimmy’s benefits in its non-qualified deferred compensation plan, the company did not pay those benefits to Darlene.
Claiming they were the rightful beneficiaries of the qualified plans as well, Terrianne and her sons filed a lawsuit against Fluor, the plans, and Darlene seeking benefits under all five plans.
The court rejected Terrianne’s argument that, even though Darlene was not Jimmy’s spouse when Jimmy designated Terrianne and her sons as his beneficiaries, under the clear language of the plan, under ERISA, and under its regulations, Darlene obtained the right to consent to the designation once she married Jimmy.
The court said that both ERISA and the Internal Revenue Code mandate that qualified retirement plans provide death benefits to surviving spouses, and that participants can only designate non-spousal beneficiaries if they have spousal consent or through the entry of a qualified domestic relations order.
The court did find that the nonqualified deferred compensation plan was a top-hat plan and as such was not subject to most of ERISA’s provisions, such as its surviving spouse provisions. However, applying federal common law, the court found that Jimmy’s designation of Darlene as the beneficiary of his nonqualified benefits was valid because he substantially complied with the plan’s beneficiary designation requirements. The court said the evidence left “no doubt” that Jimmy’s intent was to name Darla as beneficiary.
The case isBoulet v. Fluor Corp., S.D. Tex., No. H-05-0105, 10/31/05.