Tip of the Day: Make sure employees update their beneficiaries

Although some employees tend to breeze past beneficiary elections, a new Supreme Court ruling may give them pause.

In Kennedy v. Plan Adm. for DuPont Savings, the justices unanimously ruled that a pension plan administrator was in compliance with ERISA when the fund disbursed proceeds to a plan participant's ex-wife, who had waived her rights to the pension in their divorce decree.

"This is a favorable decision for plan administrators. Plan administrators can rely upon the terms of a plan document and do not need to look to various external documents to determine who is entitled to receive a distribution, which in this case was the designated beneficiary," says Carrie Byrnes, a labor attorney in the Chicago office of Bryan Cave LLP.

"Going forward, parties going through divorces should be sure to change beneficiaries, if permitted, after the divorce is final," she adds. Family law attorneys should also be sure to counsel clients to change beneficiaries.