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Would a Retroactive Amendment be Permitted?


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A money purchase plan contains rules concerning the payment of benefits when a unmarried participant dies and does not have a beneficiary card on file. In January an unmarried participant passed away with no spouse or children. The Plan's default rule in this case is to pay the participant's estate. However, because the participant was young and had limited assets, the family has stated that no estate is expected to be opened.

Under applicable state law, the participant's parents would receive the account balance if it went through probate. They are the only ones with any viable claim.

The employer is interested in amending the Plan retroactive to the first day of the plan year to modify the distribution rules and add parents and siblings to the list of those who can receive benefits outside of probate. In other words, when an unmarried participant passed away without a beneficiary card the administrator would move down the list-- spouse, children, parents (new), siblings (new), then to the estate.

In order to save the parents the expense of opening an estate for a small benefit (> $10k) the employer is willing to make a retroactive amendment. If there were any chance of competing claims we wouldn't do this, but it looks like it will be the easiest way to handle the situation.

Any problems with such a retroactive amendment?

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