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Fiduciary Duty


Guest lawshark2
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Guest lawshark2

Our plan makes payment of the monthly retirement allowance by direct deposit on the last day of the month. If a retiree dies in the middle of the month, the allowance for that month is pro-rated. A situation has arisen where the retiree died on the 25th of the month and we were notified of the death on the 1st of the next month. The retiree designated someone other than his current wife to receive death benefits, which would include the partial month payment owed to the member for the month in which the member died. Because of the death, we reversed the electronic transfer of funds, resulting in a hardshp to the current wife who "needs" the money to pay bills, etc. But, had we allowed the funds to remain in the amount, the current wife would have been overpaid and we would need to collect that overpayment from her at a future date.

Staff wishes to develop a policy that would prevent the system from reversing the electronic transfer until the survivor is notified of the reversal. We only have 4 days to reverse the funds and this policy would allow an opportunity for the joint account holder to "grab" the money before we can reverse the deposit.

Doesn't the system have a fiduciary duty to protect trust assets and prevent the receipt of funds by someone who is not eligible to receive the funds, regardless of the "hardship" that person may experience? My argument is that allowing the spouse to receive the funds and "pay us back" when we have the ability to prevent the funds from being deposited amounts to an illegal loan of trust fund assets. Your thoughts?

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Very surprising that this has not happened before.

No matter what your procedure, the very existence of the prorated payment is the source of the problem. Does the plan document require this partial payment?

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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  • 3 weeks later...

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