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post-death spousal consent


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DC plan not subject to J&S requirement.  Participant designated spouse and two children as equal 1/3rd beneficiaries of his plan account.  Spouse did not consent before participant dies, but spouse wants the designation to be honored.  Questions:

1.  Any authority to allow spouse to consent now, post-death, without a tax-qualification problem?

2.  Alternatively, because default beneficiaries under Plan terms are first the spouse, then children, can spouse disclaim 2/3rds and have those 2/3rds go to the two children, or if spouse disclaims must she disclaim 100%, not merely 2/3rds?

Not concerned by any Title I risks here, just qualification risks.   

 

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I started to say no way but now I'm not sure.  I think that just maybe, she could disclaim a certain portion, 2/3 would do it as you suggest.  I'd ask my document provider and of course get an attorney to confirm.

Ed Snyder

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Caveat - I don't work on DC plans.  I know well that you could not have a beneficiary designation of that sort in a DB plan, but I thought DC plans were as a rule less protective of spouses.

1.  If the plan is not subject to J&S requirement, how could there be any problem with a beneficiary designation 1/3 to spouse, 1/3 to each of two children?  Does the plan mandate a 50% minimum to the spouse?  If the plan is not subject to the J&S requirement, does the plan mandate spousal consent anyway?  As usual, what does the plan say?  Why would the spouse need to consent or disclaim anything here?

2.  Assuming that the beneficiary designation was accepted as valid by the plan administrator, as the spouse and the children have not all died, you would never look to the default beneficiaries when any primary or contingent beneficiaries are alive at the time of the participant's death, would you?

I don't really understand why the plan wouldn't just pay the balance out based on the designated beneficiaries as is, unless, despite not being subject to the J&S requirement, the plan requires consent or a minimum allocation to the spouse.

Always check with your actuary first!

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I think the spouse could disclaim within 9 months but she cannot designate who gets her disclaimed benefit.

That would be determined by the Plan Document.

CBW

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Disclaiming is somewhat of a "state law" issue - and the laws vary from state to state - so it is imperative to get counsel involved who can determine if it would be appropriate, and what the requirements/consequences are.  For example, some state don't allow "partial" disclaimers.  Others may - but too what extent is an issue.

As far as simply "paying it" as everyone wants to do - you've hit upon the age old question - "who would complain it you did?"  That, unfortunately is a difficult question - because 1) who are the potential takers of the benefit under other scenarios (other potential heirs, kids of the surviving spouse, former spouse,); and 2) what "different" tax consequences result and may their be an issue there as well (e.g. if the spouse takes all, then there would be a further (potential) tax consequence when they die, etc.).

My "opinion" is that the consent can not be given now - it had to be given before the participant died.  Chances of something ever coming of it if everyone (known) agrees?  Hard to say but not high.

 

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Agreed that the disclaimer route is complicated, and dangerous.  It's dangerous because the Plan's default beneficiaries, after the surviving spouse, are the participant's "issue per stirpes," and of course the Plan can never know for sure that there aren't any issue besides the two children named who could pop up months or years from now.  Perhaps in the state in question there is a procedure to protect the Plan/Plan Sponsor from that risk, but who's going to pay to research and implement that?  I suppose the spouse on her own can think of the disclaimer idea, but my client won't recommend it to her.    

I am inclined to agree that the spousal consent requirements as expressed in the law and regulations SEEM to contemplate that the consent must be given prior to death, but I am surprised that there is no clear confirmation of this even 33 years after REA.

 

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I have actually dealt with this multiple times.  For any qualified retirement plan, pursuant to the Retirement Equity Act of 1984, if the participant is married and has not elected the spouse as the sole primary beneficiary, spousal consent must be obtained as witnessed by a notary or an authorized plan representative.  The QJSA rules are irrelevant.  The spouse can disclaim all or a portion of his or her benefits, but the disclaimer has to be valid under his/her state law (we refer the spouse to obtain legal counsel).  Whatever portion is disclaimed is treated as if there is no beneficiary designation and the terms of the plan document kick in.  As someone has previously stated, the anti-assignment clause of ERISA would not permit the spouse to name the person who would get the assets.

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My question is:  If the participant created an otherwise perfectly valid written beneficiary designation, can the spouse consent to it post-death? It doesn't sound like you've dealt with this issue multiple times, or perhaps I misunderstand. 

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Question 1:  A designated or default spouse beneficiary can consent post-mortem to the pre-death designation of a different beneficiary.  The designations and the consents must be in accordance with plan terms and procedures.  That means that post-mortem consents are dicey without an express plan provision or at least a formal written procedure.  It pays to have smart plan documents, which precludes most pre-approved plan documents.  And now custom documents are problematic because the determination letter program has been closed and the general competence of IRS personnel has declined.

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The document doesn't expressly state a rule one way or the other, just like the law and regulations, but you seem to be suggesting that the law wouldn't prohibit post-death consents.  What is the source of this confidence on your part? 

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So, based on that experience with IRS is it your understanding that if the plan document is silent the IRS would say you can't consent post-death?  Or, would IRS say it is an interpretative issue within the PA's discretion provided that discretion is exercised on a consistent basis? 

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Re-thinking this, I agree with QDROphile - I don't think there is any requirement that the spousal consent be obtained contemporaneous with the designation, so just getting the consent now may be the simple and direct way to handle the issue. 

Ed Snyder

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First, this is not a question of whether a contemporaneous consent is required, it is whether a pre-death consent is required.  Second, I am not so sure that is what QDRO is saying.  See my last post.  He evidently has specific language baked into his documents permitting post-death consents, and my client's plan does not. 

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I think your second sentence is operative. It is a matter of interpreting the plan because operation of the plan, such as beneficiary designation and consent by a spouse to the designation of a different beneficiary, must be consistent with plan terms.  It would be OK for a plan to provide that no post-mortem consent is allowed  I would not describe plan interpretation as exercise of discretion on a consistent basis, but we need not take up that point,

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1 hour ago, QDROphile said:

I think your second sentence is operative. It is a matter of interpreting the plan because operation of the plan, such as beneficiary designation and consent by a spouse to the designation of a different beneficiary, must be consistent with plan terms.

I think there is an additional issue in that 1) the beneficiary designation was NOT effective without the spousal consent; and 2) can or does the ineffective beneficiary designation survive the death of the participant?

Playing devils advocate here, but what's to stop someone from saying the participant "withdrew" the ineffective beneficiary designation because the spouse never signed it?  In other words, the participant "gave up" and died believing that he would leave his benefit to his surviving spouse.

That's probably not the case in the current situation, but it is a question that could arise unless the plan, as QDROphile suggests, contains language that clearly allows the bene form to survive the participant's death AND that is clearly communicated to participants so they are aware of the "default" actions taken should their bene form not be consented to prior to death.

Just thinking (like a lawyer) out loud....

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