Beneficiary Designations Following Divorce Need Attention
Like most aspects of the Employee Retirement Security Act (ERISA) and the employee benefits world, determining who is entitled to death benefits under an Accidental Death and Dismemberment policy (AD&D), Life Insurance policy, or similar plan depends on several (often complicated) factors. Your beneficiary designations need attention following divorce in order to ensure that the intended person receives the benefits in the event of your untimely death.
- Is the policy governed by ERISA?
- Does the Policy automatically void ex-spouses as beneficiaries?
- Did the participant/employee redesignate the ex-spouse as beneficiary after the divorce?
- When did the divorce occur?
- Which state law applies?
- Does the policy have a choice of law clause?
- Does the divorce decree specify how benefits will be distributed?
Is the benefit plan governed by ERISA?
ERISA governs most employee benefits offered through private employers, including retirement and life insurance benefits. If your life insurance or retirement benefit plan is governed by ERISA, federal law will control how benefits are distributed upon your death. Under federal law benefits are generally distributed according to the applicable plan documents. ERISA also requires married employees to designate their spouse as the primary beneficiary unless the spouse provides a signed, notarized waiver.
Some employers, however, are exempt from ERISA. ERISA-exempt policies are not governed by federal law, but instead usually controlled by state law. Many states have enacted laws that conflict with federal ERISA law. Whether the Plan is governed by ERISA or not may have a significant effect on the outcome of your benefit claim. For instance, if the employer sponsoring the benefit plan is a public university (considered a “government” plan exempt from ERISA), state law could apply. If the university is a private university, then ERISA would likely apply to the death benefit policy. The two policies could have the exact same language concerning the effect of divorce on the distribution of death benefits, but the outcomes could be opposite.
It is not always clear whether the employer is exempt from ERISA and it is important to contact an attorney who understands ERISA to make this determination if you are not sure.
What does the Policy Say?
Many policies were amended in the 1990s and 2000s to automatically void ex-spouses as beneficiaries. The plan administrator should generally follow the terms of the plan, as long as the plan is not in violation of federal law (if ERISA governed) or state law (if ERISA-exempt).
If the ERISA governed policy is silent on the effect of divorce, the plan administrator should generally distribute the death benefits according to the applicable beneficiary designation form (unless there is an effective qualified domestic relations order, which is outside the scope of this discussion).
If, however, the policy at issue is ERISA-exempt, and does not specify the effect of divorce on the beneficiary designation, state law may still bar distribution to the ex-spouse.
State Law Concerning The Effect of Divorce On The Beneficiary Designation:
Many states have enacted laws regarding the effect of divorce on the policy’s proceeds. Ohio law states that “Unless the designation of beneficiary or the judgment or decree granting the divorce…provides otherwise…if a spouse designates the other spouse as a beneficiary…and if…the spouse who made the designation…is divorced from the other spouse…then the other spouse shall be deemed to have predeceased the spouse who made the designation…and the designation of the other spouse as a beneficiary is revoked as a result of the divorce…” Ohio Rev. Code Ann. § 1339.63.
If you believe you are entitled to death benefits, or you would like a lawyer to review your policy to ensure the appropriate person would be awarded any survivor benefits in the event of your untimely death, call The Bushorn Firm today or contact us online here. The issue of who is the correct beneficiary in the event of divorce is rarely straight forward and it is imperative that you speak with an attorney knowledgeable of ERISA and benefit claims.
This blog is for informational purposes only. It is not legal advice. Your particular situation requires specific advice that takes into account the specific facts of your situation, your needs and other factors. The appropriate legal advice for your situation may be different from the general information provided. The Bushorn Firm cannot be responsible for your decision to use information found on the internet instead of hiring an attorney.
The legal information presented is based on Ohio law and Ohio courts. Although federal law is discussed here, the law may be applied or interpreted differently by both federal and state courts outside of Ohio. Do not assume the information presented here is true for individuals or entities in other states.