Most employers know that a married participant in a qualified retirement plan must name a spouse as beneficiary for at least a portion of the benefit unless the spouse signs a notarized written consent or the spouse cannot be located. A recent U.S. District Court decision, Gallagher v. Gallagher, involved a participant who named his son, rather than his wife, as his sole beneficiary under his 401(k) plan. The participant had married in 1974 and separated in 1989 under a separation agreement and a court order of separate support. The participant paid spousal support for the rest of his life although he and his estranged wife never again lived together. They filed separate tax returns and had not spoken for years before the participant’s death. However, they had never finalized a divorce. The participant designated his son as beneficiary in 2005, while he was separated, but not divorced, from his wife. The court decision says that the participant did not know that his wife needed to consent to the beneficiary designation so she was not asked to do so. The participant died in 2011 survived by his estranged wife and his son.

Both the wife and the son claimed the participant’s 401(k) account. The court noted that the participant’s intention was clear: he wanted his 401(k) account to go to his son. However, because the participant was still legally married to his estranged wife, she was the one who was entitled to a survivor benefit under the terms of the plan.

The lesson for participants: so long as you are legally married, your spouse will be entitled to your plan benefit unless your spouse consents. The lesson for employers: to the extent you can, assist participants in this regard by reminding them that spousal consent is needed even in situations in which husband and wife have been separated for many years.