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Beneficiary designation naming debtor

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Can a participant name a debtor as a beneficiary (assume spousal consent is not a problem)? Or is that effectively using the plan as collateral?

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My opinion:

Is the participant suffering from a terminal illness? Or is the creditor the kind who makes offers that cannot be refused? Of course, if an early death could be traced to the creditor, the creditor would be disqualified from receiving the benefits.

A typical employee (or even new retiree) is expected to live for 20 years or more, and nothing would be payable to the creditor until after the participant had died. What kind of collateral would that be?

In any event, there is never anything a beneficiary can do to interfere with the participant's enjoyment of his or her benefits/account balance. If the participant blows the account on an around-the-world trip or an 80" television, the creditor can only watch (in the latter case, perhaps the participant would, literally, invite the creditor to come over and watch the Super Bowl on the "collateral").

Short answer: No, it would not be the same as assigning the benefits to someone else, so why not?

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I'd maybe double check the form after it was submitted to be sure it hadn't been improperly altered, such as an attempt to make the election irrevocable.

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Is there anything in the plan that might interfere with the naming of a non-natural person as beneficiary?

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I had not even thought about the creditor not being a natural person.

One does presume that one is talking about either beneficiary for a pre-retirement death benefit or that the benefit is being paid out as an annuity. In either case, if the benefit is to be contingent on the survival of the beneficiary (and kind of joint annuity), the plan had better limit the beneficiary to a natural person (although if we are talking about a pre-retirement death benefit, the plan should say what to do if the beneficiary is not a natural person).

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