Joining an ERISA-regulated retirement plan may leave you wondering if there are any restrictions on whom you can name as a beneficiary. Whomever you name will receive the benefits of your plan after your passing. Naturally, most people want these benefits to go to a loved one.
A spouse is automatically a beneficiary
You can name anyone as the beneficiary of your retirement plan, but most people prefer the benefits to go to their spouse, children, sibling or other family members. This can make choosing a beneficiary a challenge and will require careful contemplation.
Nevertheless, if you are married, your spouse is entitled to those benefits upon your death, whether you name them or not. ERISA mandates that even if you name someone else as a beneficiary, your spouse will receive 50% of the plan’s benefits. However, your spouse can choose to reject this benefit by submitting a spousal waiver, allowing you to designate someone else as a beneficiary.
Review your beneficiary after a major life event
In the event that you go through a divorce, it would be important to re-evaluate your ERISA retirement plan and update your beneficiary designations. Otherwise, your ex-spouse may be eligible to receive retirement benefits from you.
ERISA requires insurance companies to pay benefits per the terms of the plan. Because ERISA beneficiary designations trump state divorce decrees, even if your divorce settlement removes a former spouse from your ERISA plan, they may still be eligible to claim its benefits.
To change your beneficiary, you may contact your employer, HR or plan administrator, then complete and sign any forms and other requirements.
Ultimately, it is up to you to decide who should benefit from your retirement savings. Reviewing how state and federal regulations may impact the distribution of your retirement assets is one way to ensure that your beneficiary selection reflects your intentions.