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Opinions please on this unusual fact pattern.  Participant leaves employment with a vested benefit in a defined benefit pension plan in 2017.  Plan provisions permit him to elect an immediate lump sum distribution upon completing the appropriate forms and submitting certain documentation.  One item included in the application package is a Spousal Consent that must be completed by his spouse.  Note: he covered his spouse under various health and welfare benefit plans during his period of employment.

When he received his pension application, he indicated that his marital status is 'single-never married'.  We pointed out that he presented himself as being married during his employment.  He stated that he lied about his marital status and that he was not never married.  We prepared affidavits for him and the person who is not his spouse (PNHS) to complete.  He completed and submitted his own affidavit stating that he was never married to PNHS.  He indicated that he did not have a current address for PNHS.  We performed a search and sent the affidavit to PNHS via regular and certified mail. PNHS never submitted the affidavit, and did not sign for the certified mailing.  The affidavit sent by regular U.S. mail was not returned as being undeliverable.

Participant, of course, is super anxious to receive his distribution. We suggested that he submit an official copy/transcript of his federal tax return from the IRS for the final year of his employ with the company.  Our thought was that it would agree with his true marital status and along with his completed affidavit would permit us to distribute his pension.  Initially he stated he would request and send the tax return, then he stated that he did not file a return for that year/any year.  Recently, he is claiming that we have no authority to request copies of his tax return. 

Any suggestions?

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Just my opinion: your good intentions (ie, let's find out what is actually true) may be more than you need to do or should do.  It appears you doubt his statement so you want to "dig further".  However his statement (in writing) is the documentation you need.   If (later) it becomes apparent that he did lie, that documentation points the finger at him, not you.  You do not need to police his (possible) lie(s).

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You might want to send the new information regarding his never been married to whoever at the client is in charge of communicating with  the health plan.  Your client may be under a contractual obligation to do so.  Seems like healthcare fraud, at the least.

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I don't know, you have years of him representing himself as "married", and now he is saying he was never married.  If I am the PA, I think I would want more information. He could just be lying again because he doesn't want to get spousal consent.  Not sure what else you can ask him to do, but I would continue to reach out to PNHS and get her side of the story.  Maybe you just pay him a J&S pending resolution?

If he really was never married, and has signed that affidavit,  you should inform him that you will be suing him and PNHS for fraud to recover years of excess medical coverage.  Unfortunately, you probably can't hold his pension benefit as payment for the medical fraud, but I am sure those damages will be significant and he admitted he committed fraud.  You need to talk to an attorney and file suit against both parties.

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On 5/15/2020 at 4:20 PM, david rigby said:

Just my opinion: your good intentions (ie, let's find out what is actually true) may be more than you need to do or should do.  It appears you doubt his statement so you want to "dig further".  However his statement (in writing) is the documentation you need.   If (later) it becomes apparent that he did lie, that documentation points the finger at him, not you.  You do not need to police his (possible) lie(s).

I have to agree with this statement.  The plan sponsor may wish to investigate further and pursue further actions, but as the TPA you've taken the responsible action and asked, received a certified response and alerted the sponsor.

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Pension Admin in Ohio, the plan’s administrator might want its lawyer’s advice about how much diligence the administrator ought to use in deciding whether to believe the participant’s statement.  And the administrator might want its lawyer’s advice about how to clarify the record of its handling of the participant’s claim to follow ERISA § 503 [29 U.S.C. § 1133] and the plan’s claims procedures.

 

The administrator also might evaluate the plan’s, its administrator’s, and the employer’s risks.  Some of the potential claims against one or more of them might include the spouse’s claim for his or her survivor annuity, and the plan’s claim against its fiduciary for paying an amount the payee was not entitled to.

 

Even if the participant is eager to get a distribution, his claim if the administrator denies the non-annuity distribution might be weak if the plan grants the administrator discretion in finding facts.  And the participant might be reluctant to sue because it might expose him to counter-claims and cross-claims (if now he’s telling the truth about never having a spouse).

 

Further, the employer that paid health benefits or a portion of health insurance premiums might want its lawyer’s advice to evaluate claims for what the worker and the not-spouse stole (if the other person was not the participant’s spouse).

 

If a pension plan fiduciary’s reason for allowing a participant’s election without the spouse’s consent is that the consent “may not be obtained because there is no spouse”, that fact must be “established to the satisfaction of [the] plan representative[.]”  ERISA § 205(c)(2)(B) [29 U.S.C. § 1055(c)(2)(B)].

 

The plan’s administrator, in deciding whether the fact is sufficiently “established” must act “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent” person experienced in managing a similar defined-benefit pension plan would use.  ERISA § 404(a)(1)(B) [29 U.S.C. § 1104(a)(1)(B)].

 

A cautious person might not take at his word a person who, if he’s telling the truth now, admits he was a fraudster and thief, and committed at least one Federal crime.  18 U.S.C. § 1027 (false statements).  Likewise, the participant’s three inconsistent statements about his tax returns suggest a lack of honesty.

 

But what steps to take turn on the particular facts and circumstances and the proper fiduciary’s decision-making.

 

Unless the TPA is the plan’s administrator or claims administrator, the TPA might prefer to limit its involvement to furnishing to the administrator information the administrator does not yet know and otherwise steps not beyond the TPA’s contracted service.

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I'm wondering if there isn't a combination of fact and misunderstanding that is at play. Posit the possibility that the participant was married but somehow, some way had the marriage legally annulled.  Could he then not be lying if he believes the annulment renders him "never been married"? Long shot, but worth at least a query that is targeted to such a situation.

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There are many possibilities. 

 

But the key point is for the TPA to let the pension plan’s administrator evaluate the participant’s claim for a non-annuity distribution and, if it denies the pending claim, further afford the claimant opportunities under the plan's claims procedure.

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On a personal note, as a person who got back into the dating pool after being divorced for 10 years, I quickly found out that you can find marriage and divorce records online for almost any county in the United States, because people tend to "Fudge" the details about marital status . . . . 

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In this case, the Plan Administrator is the Plan Sponsor.  If both the Participant and the PNHS would both submit affidavits that they were never married, then the PA would be more than happy to allow the Participant to receive the lump sum distribution.   The PNHS seems determined not to assist him for whatever reason (at one point the Participant stated there were restraining orders against one another).

It's a well-funded Plan, and the benefit is relatively small - the only risk, as others have pointed out, is a future claim for survivor benefits.  With all the information on file, including the mistruths, we are at a standstill - I think we are in a place of no return, with respect to accepting his word that he was never married. 

A letter outlining the PA's position/providing his options (including a J&S annuity with his 'spouse' as beneficiary) was mailed to him a week ago.  If he protests, we will end up denying his claim for the lump sum distribution and advising him of his right to file an appeal. It may prod him into rethinking his position. 

Thanks for your consideration and responses.

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51 minutes ago, Pam Shoup said:

On a personal note, as a person who got back into the dating pool after being divorced for 10 years, I quickly found out that you can find marriage and divorce records online for almost any county in the United States, because people tend to "Fudge" the details about marital status . . . . 

We thought about doing that, but people are pretty mobile. We wouldn't know for sure where any marriage may have taken place.  Think of people who marry in Las Vegas/Hawaii or have destination weddings in the Caribbean . . .

We use a search firm to assist us with locating 'missing' and deceased participants, but their service does not include searches for spouses.  We are in the process of engaging a firm that promises more expansive, robust searches, I will inquire if state/county records of marriage are available.

Good idea!

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4 hours ago, Mike Preston said:

I'm wondering if there isn't a combination of fact and misunderstanding that is at play. Posit the possibility that the participant was married but somehow, some way had the marriage legally annulled.  Could he then not be lying if he believes the annulment renders him "never been married"? Long shot, but worth at least a query that is targeted to such a situation.

There was a lot of back and forth between the PA and this participant.  We asked for a copy of his marriage certificate and he definitely stated that he was never married and he just listed her as his spouse in order to obtain certain H&W benefits.  The person whom he stated was his spouse, was listed as bearing his last name within the H&W records.  When we performed a search using our locater service, she is also listed there using his last name. 

Our thought is that it would be pretty difficult to legally change one's name.

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The determination of whether there is sufficient information here to make the payment based on the conclusion that the participant is not married is one involving discretion, and so is a fiduciary decision to be made by the plan administrator. If a decision is reached that the evidence is sufficient, the distribution is made, obviously a problem will arise only if it later turns out that the individual was married and the spouse demands her benefit. In that case (a) you will want a clear record, for a number of reasons,  that the plan administrator (i.e., employer) did not delegate the decision to its nonfiduciary (i.e., the TPA), and (b) you will want to be able to demonstrate that you met the standard under the statute for "spouse cannot be located" (ERISA sec. 205(c)(2)(B). If the spouse does come out of the woodwork and the plan administrator has not met that standard, it will need to pay part of the benefit twice.

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Is this in a state that recognizes common law marriages? How long has he been doing this?

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5 minutes ago, Mike Preston said:

Is this in a state that recognizes common law marriages? How long has he been doing this?

And if not, did they ever live together as man & wife in a state that did recognize common law marriage?

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3 hours ago, Mike Preston said:

Is this in a state that recognizes common law marriages? How long has he been doing this?

He worked for us in Illinois, which does not recognize common law marriages.  We did not probe to find out if he was in a common law marriage in another state.  His PNHS also resides in Illinois.  Being married via a common law marriage would not really help the pension situation. 

He worked for us from 2012 through 2017 - so not a particularly long service employee.

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18 hours ago, Pension Admin in Ohio said:

Being married via a common law marriage would not really help the pension situation.

Pension Admin, why wouldn't it help?

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On 5/19/2020 at 11:04 AM, Luke Bailey said:

And if not, did they ever live together as man & wife in a state that did recognize common law marriage?

Good point.  I should have worded it that way.

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On 5/20/2020 at 12:11 PM, Luke Bailey said:

Pension Admin, why wouldn't it help?

He needs to obtain spousal consent to receive a pension distribution in the form of a lump sum.  He is asserting that despite covering a person as his spouse on his Health and Welfare benefits, he is not and has never been married.  We contacted the person whom he is covering as a spouse and she would not respond either to sign the consent nor to sign an affidavit saying they were never married.

I stated that submitting proof that he is in a common law marriage with this person is not going to help him receive the lump sum pension distribution - he would still need to obtain consent from his 'spouse'.

Am I missing something?

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3 minutes ago, Pension Admin in Ohio said:

I stated that submitting proof that he is in a common law marriage with this person is not going to help him receive the lump sum pension distribution - he would still need to obtain consent from his 'spouse'.

Right. OK. Absolutely. So the plan administrator is back to the problem of deciding whether there is a spouse or not, and how much risk it runs if it takes participant's word that there isn't one. This is a question that involves discretion,  and therefore a fiduciary decision that service providers can advise on, but ultimately decision is left with plan administrator.

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