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Fidelity paid benefits to wrong beneficiary - how to resolve?


radublu
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A week after posting the original question, I am amazed at all the responses.  I really want to thank each of you for the time you have taken to respond.  I have shared this with the wife, and she is amazed and thankful as well.  Let me try to answer a few questions, provide a little more information, and give an update.

How long the parties had been married when the Participant died?  3+ years

Was there an antenuptial agreement, or a postnuptial agreement, or a marital settlement agreement, or a Joint Last Will and Testament, wherein waiver language might be found? No, no, no, and the husband that died had no Will.

Did Fidelity provide notice to anyone of the application by the son to receive the 401(k) account proceeds?  No

The husband and wife lived in Tennessee.  The wife still lives in Tennessee.  Both the husband and wife worked in Alabama for different companies at the time of his death.  They both received their health insurance from their own employer, so it does not appear there would necessarily be any way for the the husband's employer to have known he was married.

The company is a large corporation with over 200 facilities around the world.  Their market cap exceeds $3.6B with annual revenue topping $2.4B.

As I stated in a previous post, the husband died in May 2019.  The day after the funeral, the wife along with her sister sat down and contacted the company's HR department as well as Fidelity about her husband's death.  Once informed, it appears either HR or Fidelity started a process.  She was told the designated beneficiary would receive a claim form.  Since the son was designated as the beneficiary, he received it.

Since the husband did not have a Will, his estate was subject to probate.  Three people had claim to his estate: his wife, his son, and his 2yr old adopted son.  The probate lawyer representing the wife dismissed the possibility of the wife being entitled to the 401K since the son was designated as the beneficiary.  As a result, the wife dropped the pursuit of the 401K.

In order to make the claim to the 401K, I am certain the son had to provide a death certificate along with the claim form.  The death certificate lists the husband as having a wife at the time of his death.

As suggested in the first reply in this thread, the employer's HR was contacted this week and asked to provide a SPD.  They either couldn't or wouldn't. They were also informed the wife would be making a claim - was there a claim form that needed to be used.  At this point the wife was told she needed to contact Fidelity.

The wife called Fidelity as well.  Fidelity was told the wife was the executor of the estate and was willing to provide documentation.  Fidelity was not helpful and once again told her she would have to submit a subpoena in order to gain access to the account.

At this point her probate lawyer has said he will send Fidelity a letter.  He has also offered to refer her to a lawyer more specialized in this type of matter.  As much as I had hoped this matter could be resolved more easily, it has become clear based on your comments and the responses she has received that she will need a lawyer.

The best part about all of this is that where there was no hope there is now hope.  I wanted to see this as just a big mistake that needed to be resolved.  Since there is probably significant money involved, it is clear it won't be an easy resolution.  I am surprised there does not appear to be any precedent on this issue.  In my opinion, since either HR, Fidelity, or both received the death certificate clearly stating the deceased had a wife AND there was no waiver on file that allowed the son to be paid instead of the wife, mistakes were made.

Once again, thanks for all your help.

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10 hours ago, radublu said:

Did Fidelity provide notice to anyone of the application by the son to receive the 401(k) account proceeds?  No

That certainly implies, or maybe proves, that Fidelity was acting in some kind of "Administrator" capacity.  How they could deny responsibility is beyond me, except for the fact that they are Fidelity and probably have as a corporate culture "deny, deny, attack."  Oh wait, that's somebody else.

10 hours ago, radublu said:

Once informed, it appears either HR or Fidelity started a process.  She was told the designated beneficiary would receive a claim form.  Since the son was designated as the beneficiary, he received it.

I'm working with someone and getting this type of response.  In our case it is helpful.  In your case, it is an incredible weakness in their system.

10 hours ago, radublu said:

As suggested in the first reply in this thread, the employer's HR was contacted this week and asked to provide a SPD.  They either couldn't or wouldn't. They were also informed the wife would be making a claim - was there a claim form that needed to be used.  At this point the wife was told she needed to contact Fidelity.

Make sure it is writing so they can be on the hook too for improperly denying providing an SPD.  The collective stupidity here is staggering.

Once you get the lawyers involved that should get Fidelity's attention.  They're just hoping to make it so difficult that the wife gives up.  

Ed Snyder

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6 hours ago, Bird said:

That certainly implies, or maybe proves, that Fidelity was acting in some kind of "Administrator" capacity.  How they could deny responsibility is beyond me, except for the fact that they are Fidelity and probably have as a corporate culture "deny, deny, attack."  Oh wait, that's somebody else.

I'm working with someone and getting this type of response.  In our case it is helpful.  In your case, it is an incredible weakness in their system.

Make sure it is writing so they can be on the hook too for improperly denying providing an SPD.  The collective stupidity here is staggering.

Once you get the lawyers involved that should get Fidelity's attention.  They're just hoping to make it so difficult that the wife gives up.  

 

6 hours ago, Bird said:

That certainly implies, or maybe proves, that Fidelity was acting in some kind of "Administrator" capacity.  How they could deny responsibility is beyond me, except for the fact that they are Fidelity and probably have as a corporate culture "deny, deny, attack."  Oh wait, that's somebody else.

I'm working with someone and getting this type of response.  In our case it is helpful.  In your case, it is an incredible weakness in their system.

Make sure it is writing so they can be on the hook too for improperly denying providing an SPD.  The collective stupidity here is staggering.

Once you get the lawyers involved that should get Fidelity's attention.  They're just hoping to make it so difficult that the wife gives up.  

Nicely summed up; however, this one quote from the posting produces an additional comment: 

"The probate lawyer representing the wife dismissed the possibility of the wife being entitled to the 401K since the son was designated as the beneficiary.  As a result, the wife dropped the pursuit of the 401K."

The wife might have a malpractice claim against the probate lawyer for his stupidity and error. A new lawyer needs to consider adding the probate lawyer to the list of bad actors if there has to be a lawsuit.  

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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  • 2 weeks later...

Coming in late on these posts, but agree of course with those who say that the basic abstract legal principle under Kennedy is that unless surviving spouse has consented otherwise in a notarized or properly witnessed signed writing provided to the plan administrator, she or he is the person the plan must pay, regardless of agreements or statutory provisions outside the plan. Kennedy would not permit a plan to pay someone other than the surviving spouse if the surviving spouse had not properly consented before the participant's death, and did not disclaim.

My recollection of the case law under the quoted Kennedy dicta is that the cases where the a person who was not the designated beneficiary under the plan has prevailed in state court or federal district court (not against the plan, but against the recipient of the plan payment) all involve a marital dissolution where there was no QDRO. The classic fact pattern is where a participant's ex-spouse agreed in a divorce settlement to give up all rights in participant's retirement benefits, but there was no QDRO, because ex-spouse was not getting anything. Deceased participant unfortunately leaves a pre-divorce beneficiary designation naming ex-spouse in force at time of death (a problem easily avoided, of course, by a plan provision that would automatically revoke a beneficiary designation of spouse, redundant in first place, if person ceases to be spouse). I recently reviewed many of these cases in connection with a case with very different facts from them and from the case in the OP. In these cases the lower courts are usually willing to look at whether the ex-spouse who received payment from the plan, as in Kennedy, should relinquish the payment to another party because the agreement in the divorce, while not a QDRO that is enforceable against plan, is nevertheless a state contract enforceable against ex-spouse by estate or another party. So in those cases, the plan can safely pay the ex-spouse, but in litigation where the plan is not a party, the ex-spouse may need to give up all or a portion of the benefit.

The case in the OP does not seem to fit this fact pattern, but as always a thorough inventory and analysis of relevant facts is probably called for. I don't recall that any of the cases I describe above deal with a pre-nup or similar agreement, outside a divorce settlement, but my research did not need to be, and therefore was not, exhaustive.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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