Designation of Survivor Beneficiary of Retirement Account

Becker Williams, F. Supp. 3d     , 2016 WL 878492 (W.D. Wash. 2016)

Facts: Husband and wife were married and in 2002, the husband designated the wife as survivor beneficiary of his retirement plans with Xerox.

Husband and wife were divorced in 2006. In 2007, the employer received several telephone calls from a person claiming to be the husband, who said that he wanted to change the beneficiary to his son by a prior marriage. In response to these calls, the employer sent the husband three different copies of the written form necessary to complete the change. The first two forms were not returned; the third form was returned unsigned and undated.

When the husband died, both wife and son asserted claims to the survivor benefits, and the employer interpleaded the benefits into federal court. The trial court declined to allow summary judgment, and the Ninth Circuit affirmed, finding that a telephonic change of beneficiary was potentially enforceable, even without a writing, and that a it was a material issue of fact as to whether such a designation was actually made. Becker v. Williams, 777 F.3d 1035, 1042 (9th Cir. 2015). Upon remand, the district court held a trial and addressed the merits.

Issue:

Who was entitled to the husband’s survivor benefits?

Answer to Issue:

The wife

Summary of Rationale:

Under Washington state law, to change a survivor beneficiary, an employee must substantially conform with the terms of the policy or “[S]ubstantial compliance with the terms of the policy means that the insured has not only manifested an intent to change beneficiaries, but has done everything which was reasonably possible to make that change.”   2016 WL 878492, at *2 (quoting Allen v. Abrahamson, 12 Wash. App. 103, 105, 529 P.2d 469, 470 (1974)).

The son did not meet his burden of proving substantial compliance. First, there was no evidence that the person who called to make the change of beneficiary was actually the husband. Second, the husband’s failure to return the first two forms and his failure to sign and date the third form suggest that his intention to change the beneficiary was not complete.

In this regard, the court noted that the forms themselves stated that the change of beneficiary was not valid until the form was signed and returned. “[T]he failure to complete simple, mundane tasks undermines Asa Sr.’s alleged unequivocal desire to change his beneficiary.” Id. at *3.

Third, there was strong evidence that the husband did not want to change the beneficiary. Despite the divorce, the wife had provided health care to the husband, and her efforts were influential in getting him into a kidney transplant program.

The couple had a good relationship even after the divorce, and were still raising adopted children together. The husband had an egalitarian attitude toward his nine children, suggesting that he would not have preferred the one child whom he allegedly attempted to name as beneficiary. The husband’s relationship with the one child allegedly named was troubled, making it especially unlikely that he would name that child alone.

The son argued that the divorce decree was evidence in this favor, as it awarded the benefits to the husband alone. The court disregarded the decree, since a state court order which is not a QDRO cannot have any effect upon ERISA- regulated benefits.

Because the son failed to prove a valid change of beneficiary, the court held that the wife was entitled to the survivor benefits at issue.

Lessons:

If you want to change the beneficiary of life insurance or survivor benefits after the divorce, follow the reasonable requirements of the insurance company. Fill out all required forms, and sign and date them properly. When this is not done, a court may well find that there was no valid change of beneficiary.

If you want a former spouse to waive all rights in ERISA-regulated survivor benefits or life insurance policies, state the waiver expressly in both a divorce decree and with the insurance company. Otherwise, if the beneficiary is not changed before death, ERISA may require the benefits to be paid to the former spouse. This is true even where a state statute provides that divorce automatically revokes beneficiary designations, as such statutes can be preempted by ERISA.

Observation:

Becker shows why it is good policy to require that changes in beneficiary be made in writing and signed. Given the ongoing relationship between the husband and the wife, the husband’s stated desire to treat his nine children equally, and the husband’s difficult relationship with the one child named, it is very possible that the telephone calls requesting a change of beneficiary were not placed by the husband. When a signed writing is required, it is harder for dishonest parties to accomplish an unintended change of beneficiary.

Note: This blog was originally published on January 19, 2019.