This dispute stems from a common scenario: a 401(k) plan participant names his children from a prior marriage as his beneficiaries, remarries without changing his beneficiary designation, then dies, resulting in a predictable battle between the second wife and the deceased participant’s children over entitlement to the participant’s plan benefits. In this case, the participant had been married to his second wife for only about six weeks before his death.
The Louisiana district court that originally heard the case upheld the plan administrator’s decision to award the benefits to the second wife, finding that the terms of the plan are clear: the plan provides that a participant’s spouse will be the beneficiary of the participant’s entire vested interest in the plan unless an election is made to waive the spouse as a beneficiary. No waiver of the surviving spouse’s beneficiary status was ever executed; nevertheless, the children argued that the second wife should not be considered a “spouse” because she had been married to their father for less than one year. They based their argument on Section 205 of the Employee Retirement Income Security Act of 1974 (ERISA), which states that a plan may provide that a survivor annuity will not be provided unless a participant and spouse had been married throughout the one-year period ending on the earlier of the participant’s annuity starting date or the date of the participant’s death. In finding for the second wife, the lower court determined that the one-year requirement is permissive rather than mandatory, and that ERISA contemplates that some plans may vest rights in participants’ spouses immediately upon marriage. The lower court’s determination that the administrator thus properly awarded the benefit to the second wife in accordance with clear plan terms was recently affirmed by the Court of Appeals for the Fifth Circuit. (Cajun Industries LLC 401(k) Plan v. Kidder, 5th Cir. 2011)