Mary Carol Ceselsky is an Investment Advisor Representatives of Booster, LLC. Booster, LLC is a Registered Investment Advisor. Registration with the SEC or state securities regulators does not imply a certain level of skill or training or approval or endorsement by the SEC or any regulators.”
With summer in full swing my experience with clients and 401(k) plan participants is that business kind of slows down a bit. Professional endeavors take a back seat to vacations, kids’ activities and sports. So, what better time to update your 401(k) beneficiary designations? I frequently tell folks about the importance of reviewing 401(k) beneficiary designations annually and after major life events like marriage, divorce or death of a beneficiary.
Here’s a case that highlights why:
Alvin Martinez was a company employee for 35 years. He named his children as his retirement beneficiaries after his first wife’s death. The documentation he signed clearly stated that a later marriage would revoke his beneficiary designation, unless he updated it with a notarized spousal consent. Martinez did eventually remarry, but he never updated the spousal consent form or asked for clarification from anyone in HR, the record keeper or his 401(k) advisor.
Unfortunately, Mr. Martinez died unexpectedly. His employer paid out nearly $3 million from his 401(k)…to his second wife. Martinez did not have a signed waiver from his second wife, so the company properly paid his balance to her, rather than to his four adult children listed on the beneficiary form.
Although his 401(k) statements continuously listed his children as beneficiaries, the court ruled that Mr. Martinez received accurate and repeated disclosures — in the beneficiary form, plan documents, and summary plan descriptions — stating that remarriage affects the beneficiary designations.
This past May, the U.S. Court of Appeals for the Fifth Circuit upheld the dismissal of a fiduciary breach claim against the corporation’s Employee Benefits Committee. The court found that the company correctly followed plan documents, which state that marriage revokes prior beneficiary designations unless a spousal waiver is signed.
We advise not to wait, reach out to your plan administrator or your financial advisor. If you have a retirement fund – and I hope you do – don’t make assumptions about what you think is going to happen. Your advisor or plan administrator can answer questions – or get you the information you need.
About the Author
Mary Carol “MC” Ceselsky-Grunder, Booster
Mary Carol “MC” Ceselsky-Grunder has earned a strong reputation in financial services in the Baltimore – D.C. area for over 30 years. Besides being a rarity as a woman-owned firm in the financial advisory sector, the name BOOSTER is similarly unique. “I didn’t want a brand with a bunch of buzzwords like Integrated Something Group and my last name doesn’t exactly roll off the tongue. BOOSTER truly represents who I am, how I approach business, and how I help my clients – with facts, honesty, and enthusiasm.”
MC has even abandoned the traditional title of President or CEO. “I like the title Chief Booster,” she explains. “It is so much more descriptive of what I do in terms of employee education, fiduciary oversight, and growth. Like the gear in our logo, we become an integral part of our clients’ strategic planning.
