Two important cases involving TRS retirement benefits and a Mediated Settlement Agreement The Texas Supreme Court case of Holmes v. Kent, 221 S.W.3d 622 (Tex. 2007) (citing Tex. Gov’t Code sec. 824).
FACTS: Before Wife retired, she elected to take an optional annuity under TRS and named her Husband as beneficiary so that upon Wife’s death, Husband would receive TRS retirement annuity payments for the Husband’s life. When the parties divorced, Wife was in pay status. Wife never changed the beneficiary designation as per TRS requirements. After the divorce, Wife died. TRS paid Husband (Holmes) the annuity benefits. Wife’s son, Brad Kent, who was her only heir and executor of her estate, filed suit to get the benefits, rather than Holmes. The trial court granted summary judgment for Holmes. Kent appealed and got a favorable ruling. Thereafter, Holmes appealed to the Texas Supreme Court.
HOLDING: The Texas Supreme Court reversed the judgment of the court of appeals and rendered judgment for Holmes because the Wife did not remove the Husband as beneficiary as per TRS requirements and because the divorce decree did not order the removal of the Husband as beneficiary.
LAW: The Teacher Retirement System (TRS) allows a retiree to elect, instead of a standard service retirement annuity, an optional annuity that provides reduced payments to the retiree during his or her life and, at death, continued payments to and throughout the life a designated beneficiary. Only one beneficiary can be designated, and changing the designation is restricted, since the value of the optional annuity, and hence the cost to TRS, depend on the beneficiary’s longevity. To revoke the beneficiary designation, the retiree must strictly follow the TRS requirements: prescribed forms must be used, and either (1) a divorce court must approve or order the revocation or accept a property settlement or (2) the beneficiary spouse must sign a notarized consent to the revocation. Tex. Gov’t Code sections 824.101(c), 824.1012, and 824.1013.