Changing beneficiary upon legal separation
Posted 27 August 2005 - 12:26 AM
However, the employee has turned in a new 401(k) beneficiary form to remove the wife. I am not sure about accepting the beneficiary change due to the fact that he is still considered as having a spouse. Has anyone else come across this issue?
Posted 27 August 2005 - 12:30 PM
Let's assume it does.
Is your question whether this participant is to be considered "not married" for purposes of the form? Well, IANAL, but I have always thought that a legal separation was not sufficient to scissor a spouse from benefits otherwise called for under the plan, unless the separation agreement is recognized by the courts and calls for the spouse to give up all rights under the plan.
Let's see what the lawyers have to say.
Posted 28 August 2005 - 12:35 AM
Also, the employee refuses to provide me with the full legal separation document. I have only received thet page that states the date of legal separation and court signatures. I informed the employee that I have not received sufficient information from him that reflects his ex is no longer eligible for his retiremet benefits. I explained and provided him with our QDRO draft.
I have a feeling that there is more to his legal separation and he is refusing to have me see it because there probably is language pertaining to the retirement plan. He is really upset but I have a fiduciary responsibility to uphold.
I just wanted to see if anyone else has had this problem come up and what everyones view was on this.
I'll mention this to our attorney next week when we deal with the new SERP issues.
Posted 29 August 2005 - 10:11 AM
Posted 29 August 2005 - 11:28 AM
Posted 29 August 2005 - 12:32 PM
Q-27: Are there circumstances when spousal consent to a
participant's election to waive the QJSA or the QPSA is not required?
A-27: Yes. If it is established to the satisfaction of a plan representative that there is no spouse or that the spouse cannot be located, spousal consent to waive the QJSA or the QPSA is not required. If the spouse is legally incompetnent to give consent, the spouse's legal guardian, even if the guardian is the participant, may give consent. Also, if the participant is legally separated or the participant has been abandoned (within the meaning of local law) and the participant has a court order to such effect, spousal consent is not required unless a QDRO provides otherwise. Similar rules apply to a plan subject to the requirements of section 401(a)(11)(B)(iii)(I).
Under this reg a plan may provide that spousal consent is not required if the participant submits a court order demonstrating that he/she is legally separated.
It is not the beneficiary designation forms that will govern but the portion of the plan document that sets the process for designating beneficiaries.
By the way, many individuals (especially those whose faith does not permit a divorce) will legally separate. By going through this process, they cease to be responsible for each other's debts after the separation but are not legally free to remarry.
Hope this helps.
Edited by JDuns, 29 August 2005 - 12:34 PM.
Posted 29 August 2005 - 01:02 PM
I dont understand the logic of allowing for a change of death beneficiary without spousal consent upon legal separation if the authorization for allowing the designation of a non spouse will be invalidated upon the death of the employee. In NY and NJ death before the divorce decree is issued terminates the divorce proceeding and the parties are deemed legally married on the date of death.
Posted 29 August 2005 - 01:17 PM
Posted 29 August 2005 - 01:26 PM
It is my understanding that this is the primary reason for a "permanent separation", and hence the reason for the reference to "legally separated" in the quoted Q&A.
By the way, many individuals (especially those whose faith does not permit a divorce) will legally separate.
Posted 29 August 2005 - 01:40 PM
Further, even if the document does not invoke that special consideration, if the legal separation document satisfies the definition of a QDRO it would continue to be valid upon death.
Of course, the OP should determine what is really going on in the plan by referencing the plan document and then getting confirmation from the plan's lawyer.
Posted 29 August 2005 - 03:52 PM
Posted 29 August 2005 - 11:37 PM
I can't provide a citation, but out here in California, the QDRO in the absence of divorce is almost common. Well, not really common, but not so rare as to be unheard of, either.
Thanks for the dialog. I agree that if the spouse has given up rights via an anticipatory QDRO, they should also be willing to execute a beneficiary designation agreeing to somebody else as beneficiary. I would suppose that a properly drafted separation agreement might direct the spouse to do so at the behest of the participant.
Posted 30 August 2005 - 10:46 PM
Thanks for providing that insight as to why someone would seek a legal separation.
I've spoken with many domestic relations attorneys about that topic over the years, and not one of them had ever even heard of someone seeking a legal separation. In fact, they couldn't understand why somebody would do that, because the costs of obtaining a legal separation decree as much as obtaining a divorce decree (in California at least), and when it is all over, you're still married to the person.
Now I know why someone would choose the legal separation route.