A 58-year-old man with a $620,000 401(k) balance died suddenly of a cardiac event four years after his divorce.

Despite drafting a new will leaving everything to his two adult children, his ex-spouse received the entire retirement account.

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The plan administrator wired the full amount to the ex-wife because she remained the primary beneficiary on the 401(k) form.

The children received nothing from the account.

Why ERISA Overrides State Law

Employer-sponsored 401(k) plans are governed by the Employee Retirement Income Security Act (ERISA), a federal law. Under 29 U.

S. C.

§1144, ERISA preempts state law on plan administration questions.

The U. S.

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Supreme Court has repeatedly affirmed that plan administrators must pay the person named on the beneficiary form. Divorce decrees, wills, and intent do not matter under this regulation.

The beneficiary form serves as the sole evidence the administrator may consider.

Statements from grieving children that their parent would never have wanted this outcome cannot alter the distribution.

The QDRO Misconception

Many people assume that a Qualified Domestic Relations Order (QDRO), which splits retirement assets during divorce, also resets the beneficiary designation.

However, a QDRO typically addresses only the split of the existing balance at the time of divorce.

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It does not affect who inherits future contributions or future market growth.

If a participant contributes another $80,000 after divorce and the market doubles that amount, every dollar still goes to the ex-spouse listed on the form.

State automatic revocation-on-divorce statutes, which strip an ex-spouse from beneficiary designations for IRAs and life insurance, do not apply to ERISA plans.

A 401(k) functions as a federal island within state law.

In community property states, a current spouse has automatic statutory rights to a portion of the 401(k) during marriage.

Once the divorce is final, the beneficiary form alone governs.

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This case highlights the importance of updating beneficiary designations after major life events. A will or divorce decree cannot override the form on file with the plan administrator.