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ERISA Covered Retirement Plan Beneficiary Mother Can Precede ERISA Beneficiary List

Employer-sponsored plans offer many attractive features for the average worker when it comes to retirement savings: higher contribution limits, reduced investment management fees and legal accountability provisions are just a few benefits they offer. They’re even protected against creditors in bankruptcy unlike individual retirement accounts (IRAs). But while these workplace-based accounts provide numerous advantages, beneficiaries need to be reviewed periodically as life changes occur as it’s important for these details to stay current with what has changed with you and when changes take place.

ERISA-covered retirement plans must have beneficiaries designated upon death; otherwise they will pass to their probate estate and distributed according to state intestacy law. This may lead to disputes between a deceased’s named beneficiaries and those named in their will, and this situation has recently been addressed by Washington Court of Appeals when ruling that state law can override an ERISA-mandated beneficiary list in certain instances.

ERISA, or the Employee Retirement Income Security Act of 1974, sets minimum standards for most voluntarily established pension and healthcare accounts in private industry. Under its rules, surviving spouses of deceased individuals inherit their unused retirement plan balance regardless of any other beneficiaries that exist; additionally, federal law mandates employees select at least two beneficiaries upon death.

When an ERISA-regulated account holder names someone other than their spouse as beneficiary, that person must submit a waiver and meet any legal requirements to fulfill that request. This step can help protect divorced individuals from their ex-spouse inheriting their benefits upon death.

But according to a US Supreme Court ruling, state laws cannot escape preemption by simply asserting they relate to an ERISA-regulated account. Specifically, both Mississippi bad-faith law and Texas healthcare liability law did not “relate to” or have enough connection with an ERISA policy or self-funded ERISA plan to trigger preemption.

This case underlines the significance of regularly updating your ERISA beneficiary information as your circumstances evolve, particularly consulting an attorney to make sure there are no legal requirements to certify non-spouse beneficiaries. Before filing for divorce, it may be beneficial to explore options like changing the beneficiary or waiving a spousal waiver on an ERISA-covered retirement account, or moving it into an IRA not subject to preemption by state laws. An IRA allows you to name multiple beneficiaries, including charities and trusts, without falling under ERISA regulations. At The Peace Law Firm, we can assist with any related ERISA-related issues or questions; contact us now for further details or an appointment!


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