Other Matters - Divorce and Beneficiary Designations - Texas Interpretation of Egelhoff

Heggy v. American Trading Employee Retirement Account Plan, 56 S.W.3d 280

(Tex. App.—Houston [14th Dist.] 2001, no pet. h.).

Husband married Wife One and named her as the beneficiary of a retirement account governed by ERISA. Husband subsequently divorced Wife One and married Wife Two. He died without changing the beneficiary designation on his retirement account. The lower court held that Wife Two was entitled to the account.

The appellate court reversed. The court recognized the ERISA preempts state law such as Fam. Code § 9.302 which automatically voids the designation of an ex-spouse as the beneficiary of a retirement plan. The court reviewed the split of authority among the circuits regarding whether the provisions of ERISA or federal common law controls designation of beneficiaries for plan benefits. The court concluded that the United States Supreme Court case of Egelhoff v. Egelhoff, 532 U.S. 141 (2001), resolved the conflict by holding that state law provisions altering the specified beneficiary upon divorce were preempted by ERISA. The court expressly declined to follow the post-Egelhoff decision in Weaver v. Keen, 43 S.W.3d 537 (Tex. App.—Waco 2001, no pet. h.), which adopted an automatic voiding upon divorce approach as federal common law.

Moral: Designations of beneficiaries on plans governed by ERISA should be promptly changed upon divorce.