Financial Symmetry News & Views

Natalie Choate, a respected resource on retirement plans/IRA rules and writer for MorningstarAdvisor.com, recently addressed some financial planning issues that Same-Sex couples face.  Natalie is a lawyer in Boston, MA who speaks regularly across the country on the specifics of many estate planning and retirement plan issues.  We were lucky enough to see her speak here in Raleigh during the FPA of the Triangle Symposium in September 2007.

Natalie breaks down the specific estate distribution of a 401k and a pension plan for a hypothetical same-sex couple.  Her findings are a reminder of how important it is to keep retirement plan beneficiary designations current!

Question: “John,” age 54, and “Jim,” age 58, were married to each other under Massachusetts law. Their marriage is not recognized under federal law. Jim died, leaving a 401(k) plan and a money purchase pension plan, both maintained by his employer, Acme Widget Co. Jim had named John as designated beneficiary of the pension plan, but Jim never filed any beneficiary designation form for the 401(k) plan. The 401(k) plan provides that, if no beneficiary is named, the benefits shall be paid to the employee’s “surviving spouse, if any, otherwise to the employee’s estate.” Elsewhere, the plan provides that the interpretation and administration of the plan shall be governed by Massachusetts law “to the extent not pre-empted by ERISA.” I assume this means the 401(k) benefits must be paid to Jim’s estate, since under federal laws such as ERISA same-sex marriage is not recognized. John is the sole beneficiary of the estate, under Jim’s will, which has been admitted to probate in Massachusetts. What are John’s rights with respect to the pension plan? The 401(k) plan?

See Natalie’s answer on MorningstarAdvisor.com.