Many prenuptial agreements include provisions about what happens with each party’s retirement and pensions in the event of divorce.
In such prenuptial agreements, some couples may decide that they will divide or otherwise share their retirement and pensions, while others may decide that each will keep their own retirement and pensions, thereby waiving their interest in each other’s retirement.
However, there are certain types of pensions where the waiver alone may not be specific enough to fully waive one’s rights.
What happens with a traditional pension?
Traditional pensions, more formally known as defined benefit plan pensions, or commonly known as annuities, are traditional retirement plans that provide a fixed, pre-established monthly payment to employees upon retirement.
A common example in the DMV area is the Federal Employees Service Retirement System, also known as FERS. Some pensions are qualified, or regulated, under a federal law called the Employee Retirement Income Security Act (ERISA).
Often, traditional pension plans have optional survivor benefits. Survivor benefits provide ongoing benefits, typically in the form of monthly payments, to specific beneficiaries, usually limited to a spouse or former spouse, after the death of the owner.
Generally, if a survivor benefit option is elected, the owner receives a lower monthly payment because their monthly payment is reduced by the cost of electing the survivor benefit.
When negotiating prenuptial agreements (and in negotiating divorces) couples often negotiate whether both (a) during the marriage and also (b) after marriage, the spouse of the owner will (i) waive the survivor benefit, or (b) receive a survivor benefit, and if so, how much they will receive and who will absorb the cost of said benefit.
Many prenuptial provisions include provisions providing that in the event either party has a pension, each party agrees to waive their right to survivor benefits of their spouse’s retirement plans.
However, if the pension plan is qualified under ERISA, the waiver of survivor benefits in a prenuptial agreement is not enforceable.
What happens if you have an ERISA-qualified pension?
For ERISA-qualified pension plans, survivor benefits cannot be waived by a prenuptial agreement.
Under ERISA, one cannot waive their right to survivor benefits in an ERISA-qualified retirement plan prior to marriage. In other words, under ERISA, a prenuptial agreement, which is an agreement entered into prior to marriage, cannot waive survivor benefits in an ERISA-qualified pension plan.
In order to waive survivor rights under ERISA, the parties must already be married to one another. When a prenuptial agreement is drafted and signed, the parties are not yet married; therefore, any waiver of survivor benefits is not binding.
To properly waive survivor benefits to an ERISA-qualified pension plan, parties must comply with statutory requirements under 29 U.S.C. § 1055. Under federal law, survivor benefits to an ERISA-qualified pension plan may be waived when the following requirements are satisfied:
- Written Consent by the Spouse – The parties must already be married, and, while married, the spouse of the owner must execute a written consent waiving their rights to an ERISA-qualified pension plan. Additionally, a notary or plan representative must be present to witness the signing of the document.
- Designation of a Beneficiary or Form of Benefits – The written waiver must identify an alternate beneficiary or payment form. Furthermore, while married, future changes to the alternate beneficiary or payment form cannot be made without the consent of the spouse who is waiving their rights.
- Waiver Must be Submitted During the Election Period – The waiver must be completed and submitted to the plan within an applicable election period. Generally, the election period varies for each case, as it is typically based on when the monthly payments commence.
It is important to note that these requirements only apply to survivor benefits; therefore, parties may still be able to waive monthly pension benefits through a prenuptial agreement and have such a provision be enforceable.
While signing a prenuptial agreement is not enough to waive survivor benefits to an ERISA-qualified pension plan, these benefits can be waived once you are married.
If you signed a prenuptial agreement in which you agreed to waive survivor benefits to an ERISA-qualified pension plan, for that waiver to be enforceable, you can make that waiver enforceable by signing a postnuptial agreement confirming such waiver.
If you are about to enter into a prenuptial agreement and want to waive survivor benefits to an ERISA-qualified pension plan, plan in your prenuptial agreement to sign a brief postnuptial agreement, after your marriage, waiving your rights.
Erin Kopelman is a divorce attorney who handles cases involving domestic relations and family law. For more information, contact Erin at elkopelman@lerchearly.com.
Law Clerk Gwynn Mak contributed to this article.
