A divorced worker who updates a will but forgets to change the beneficiary form on a 401(k) or employer life insurance policy can inadvertently leave the entire account to an ex-spouse. The U.S. Supreme Court settled the legal question in Egelhoff v. Egelhoff, 532 U.S. 141 (2001), holding that federal retirement law overrides state statutes designed to automatically revoke an ex-spouse’s beneficiary status after divorce. The result is blunt: the name on the form wins, even when a will, a divorce decree, or state law says otherwise.
How Federal Law Locks in an Outdated Beneficiary Form
The conflict traces to a single federal statute. Under ERISA, plan administrators who manage 401(k) accounts and employer-sponsored life insurance must distribute benefits strictly in accordance with plan documents. That language leaves no room for a probate judge or a state divorce statute to redirect the money after someone dies. The beneficiary designation form is the controlling document, and the plan fiduciary is legally bound to follow it.
Several states tried to fix this problem by passing “revocation-on-divorce” laws that automatically void an ex-spouse’s beneficiary designation when a marriage ends. Washington State had such a law on the books when David Egelhoff died after a car accident, two months after his divorce. His ex-spouse was still listed on his employer life insurance and pension plan. His children from a prior marriage argued that state law should have revoked the designation and redirected the benefits to them.
The Supreme Court disagreed. In the Egelhoff decision, the Court ruled that ERISA preempts state revocation-on-divorce statutes when the benefits come from an ERISA-covered plan. Because the employer plans were governed by ERISA, the administrator had to pay the person named on the beneficiary form, regardless of the divorce or the state statute. The ex-spouse collected the proceeds, and the children received nothing from those accounts.
That ruling created a sharp split. State revocation laws still work for assets like individually owned life insurance policies, IRAs that are not subject to ERISA, or bank accounts with payable-on-death designations. Those assets are typically governed by state law, and a divorce can automatically remove an ex-spouse as beneficiary if the state has a revocation statute. But for workplace retirement plans and employer group life insurance, the beneficiary form is the final word. A will cannot override it. A divorce decree cannot override it. Only a new, properly filed beneficiary designation can change who receives the money.
The logic is administrative as much as legal. ERISA aims to give plan sponsors a single, uniform set of rules. If administrators had to interpret 50 different state divorce statutes, examine court files, and weigh conflicting documents, payouts would slow and litigation would increase. By forcing administrators to follow the plan’s written records, Congress and the Court chose clarity, even when it leads to harsh results for families who assumed a divorce would “take care of” an old designation.
Federal Employees Face the Same Filing Trap
The problem is not limited to private-sector workers. Federal employees covered by the Federal Employees’ Group Life Insurance program face a parallel rule. The Office of Personnel Management explains that a completed FEGLI beneficiary form must be received by the employing office before the employee’s death for it to take effect. If a federal worker divorces but never submits a new form, the old designation stands, even if a former spouse is still named.
Even a court order does not automatically fix the situation. OPM guidance notes that a divorce decree or other judgment can direct FEGLI benefits only when it is properly filed and accepted under the program’s procedures, and even then, it does not replace the need for a valid designation. If the paperwork is incomplete or never reaches the right office, the agency will pay benefits according to the last effective designation on file or, if none exists, under the statutory order of precedence. In practice, that means an ex-spouse listed years earlier can still receive the full payout.
This structure creates a common, preventable trap. People often focus on dividing property, refinancing a home, or updating a will during a divorce, but they overlook beneficiary forms tucked inside retirement plans and group insurance policies. Because ERISA and federal employment rules give those forms priority, failing to update them can undo the rest of an estate plan.
Practical Steps After Divorce or Major Life Changes
The legal framework leaves little room for courts to correct mistakes after death, so the burden falls on individuals to keep records current. After a divorce, marriage, birth, or death in the family, workers should request beneficiary forms for every employer-sponsored plan, including 401(k)s, pensions, and group life insurance, and submit new designations where needed. Federal employees should verify that their FEGLI and retirement forms are up to date and that the employing office has acknowledged receipt.
Keeping copies of signed forms, confirming that administrators have processed changes, and revisiting designations every few years can help ensure that benefits flow to the intended recipients. Under the rules confirmed in Egelhoff and echoed in federal employment programs, the simple act of filing a new beneficiary form is often the only way to prevent an ex-spouse from inheriting by default.
