Prenuptial Agreements May Not Waive Beneficiary Rights

The mere inclusion of a clause in a prenuptial agreement to waive beneficiary rights to a 401(k) plan’s proceeds is not enough to enact an actual spousal waiver. Rather, a spouse’s rights are only waived if the consent requirements in the Employee Retirement Income Security Act of 1974 (ERISA) are complied with. This was the recent finding of a federal appellate court.

At issue was whether a deceased man’s then-wife or his parents were entitled to his 401(k) benefits. Michael G. Cox II and Kathy L. Cox executed a prenuptial agreement on February 19, 2010, before getting married on March 6, 2010. Michael filed for a divorce on May 4, 2011, but died on May 21, 2011, before the divorce was finalized. His 401(k) plan, the MidAmerican Energy Corporation (MEC) 401(k) plan, asked Kathy on August 2, 2011, to sign a waiver disavowing any rights to receive Michael’s retirement savings. Kathy refused and the case was taken to court.

In upholding a lower court’s ruling in favor of Kathy instead of Michael’s parents, the 8th U.S. Circuit Court of Appeals opined, “For Michael’s designation to control, Kathy must have waived her rights in accordance with Section 1055(c)(2)(A)” of ERISA. The court concluded Kathy did not explicitly do so.

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