Estate of Deceased 401(k) Plan Participant Can Sue Ex-Spouse to Enforce Divorce Decree

In 2000, William Kensinger enrolled in a 401(k) retirement plan through his employer, URL Pharma, Inc. At the time of his enrollment, William was married to Adele, whom he designated as the plan’s primary beneficiary. Their marriage did not last, however, and divorce proceedings began in 2008.

On April 20, 2008, William and Adele entered into a Property Settlement Agreement, providing that they "agree to waive, release, and relinquish any and all right, title and interest either may have in and ot the other's ... retirement benefit and deferred savings plan.

The Agreement was formalized and made a part of their divorce decree by a New Jersey court on July 10, 2008.

Nine months later, William died. He did not leave a Will and had not changed the beneficiary of his 401(k) plan from Adele to someone else.

Is Adele entitled to William's 401(k) plan?

Cases like these arise regularly. In fact, the leading case on the issue of who gets the plan was Kennedy v. duPont Savings & Investment Plan, decided by the U. S. Supreme Court in 2009.

The facts in that case are virtually identical to the Kensinger case. The Supreme Court ruled that the identity of who gets the retirement plan is clear and unambiguous: the beneficiary named by the deceased plan participant in the plan documents themselves.

That's because the federal law of pension and retirement plans -- the Employee Retirement Income Security Act (ERISA) -- governs the administration of 401(k) plans (among other types).

Under ERISA, the only way a state court can change the plan beneficiary is through a Qualified Domestic Relations Order (QDRO) that meets the peculiar requirements set forth in ERISA. The New Jersey divorce decree was NOT a QDRO; therefore, the URL Pharma plan administrator properly distributed the 401(k) plan to Adele.

And so the federal Third Circuit Court of Appeals held in the lawsuit brought by William's Estate against Adele and URL Pharma seeking a declaration that the Estate was entitled to the funds.

But that was not the end of the story. Noting that the U. S. Supreme Court, in the Kennedy case, did not decide the question of whether the estate could have sued the ex-wife to recover the benefits after she received them from the plan administrator, the appeals court held in the affirmative.

Estate of William E. Kensiger, Jr., v. URL Pharma, Inc., and Adele Kensinger, March 20, 2012.

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