By Ian Berger, JD
IRA Analyst
At Ed Slott and Company, we continually stress how important the beneficiary designation form is. Because it’s that form – and not the retirement account owner’s will or other estate planning documents – that usually dictates who will receive the owner’s IRA or 401(k) account after death.
But, as a recent case shows, for ERISA plans, there is one rule that trumps the beneficiary designation form: The spousal beneficiary rule. That rule says that a married ERISA plan participant’s 401(k) balance must automatically be paid to his surviving spouse after death – unless the participant names another beneficiary and the spouse consents to the non-spouse beneficiary.
In LeBoeuf vs. Entergy, No. 24-30583 (5th Cir. 2025), Alvin Martinez started working for Entergy Corporation in 1967 and participated in the company’s ERISA 401(k) plan. In 2002, Martinez’s wife died. In 2010, he named their four children as beneficiaries on his 401(k) plan beneficiary designation form. The form clearly spelled out the ERISA spousal beneficiary rule. It also warned participants to update the form and get spousal consent if they get married after submitting it. The form noted that a later marriage automatically revokes a prior beneficiary designation without spousal consent. There was similar language in the official plan document and written plan summaries that Martinez received.
Martinez retired in 2003 and kept his 401(k) funds in the plan. In 2014, he married Kathleen Mire. Martinez received quarterly statements from T. Rowe Price, the plan’s trustee, that told him how his plan investments were doing. Even after his second marriage, these statements listed the four children as his beneficiaries and did not mention the ERISA spousal beneficiary rule.
Martinez died in 2021, with a whopping $3.0 million in his 401(k) account. Martinez never updated his beneficiary designation form, and Mire (the second wife) never signed a waiver of her spousal rights. So, as required by ERISA, the plan paid the $3.0 million to Mire.
Naturally, the children sued, and the case was appealed to the Fifth Circuit Court of Appeals, which covers Louisiana, Mississippi and Texas.
The Court of Appeals said that the plan had acted properly. The children argued that Entergy Corporation, the plan’s administrative committee, and T. Rowe Price were all plan fiduciaries under ERISA, and they breached their fiduciary duty by issuing those quarterly statements to Martinez (which listed the children as beneficiaries but did not mention the spousal beneficiary rule). But the Court found that Entergy and T. Rowe Price were not ERISA fiduciaries. Even though the committee was a fiduciary, it hadn’t breached its duty.
We don’t know whether Martinez intended for his four children or his second wife to receive the $3.0 million. But, in either case, this case shows how important it is to periodically review and, if necessary, update beneficiary designation forms. That’s especially true after life events like a second marriage. Yet, if a spouse refuses to consent to another person being named as beneficiary, there’s nothing that can be done to prevent the spouse from receiving the money after the 401(k) owner dies.
If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.
https://irahelp.com/in-erisa-retirement-plans-spouse-beneficiaries-rule/
