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NON-ERISA Plans and Beneficiary Designation


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For ERISA Plans I know that the spouse has to be the designated primary beneficiary and they spouse has to acknowledge that they are not the primary beneficiary of the Plan if someone, other than the spouse is designated. Is that the same requirement for Non-ERISA plans? Are Non-ERISA 403b plans subject to the Retirement Equity Act?

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https://www.thetaxadviser.com/issues/2021/jan/retirement-plans-comparison-401k-sec-403b.html

I found the above article which talks about the different 403(b) plans, referring to non-ERISA plans as "unrestricted". The article includes the paragraph below that states ERISA spousal protections do not apply. I did not independently verify that statement, but it makes sense to me.

Spousal annuity requirements

A second requirement inapplicable to unrestricted 403(b) plans involves spousal annuities. Sec. 401(k) plans are generally required to pay a participant's retirement benefit in the form of annuities that are designed to protect spouses and surviving spouses.73 A plan subject to spousal annuity requirements must generally make provision for two different types of annuities: (1) a qualified joint and survivor annuity for the participant and his or her spouse, and (2) a qualified preretirement survivor annuity for the surviving spouse of a participant who dies before retirement.74 Unrestricted 403(b) plans, however, are not required to provide these annuities.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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A few cautions:

If the plan is a governmental plan, check the plan’s documents and State law.

If the plan is a church plan, check the plan’s documents. Even if no external law calls for a particular provision, a sponsor might decide that providing for a participant’s spouse (or, at least, not depriving a spouse of an interest without the spouse’s consent) follows the church’s faith.

If a plan is neither a governmental plan nor a church plan and the charitable organization believes it is not a plan within the meaning of ERISA’s title I, consider that a disappointed surviving spouse might assert that the plan is an ERISA-governed plan. A Federal court decides a defendant’s motion to dismiss a complaint for failure to state a claim considering only the complaint’s alleged facts, with no opportunity for a defendant to introduce facts. Because of this, a defendant might not persuade a judge that a complaint is so implausible that it asserts no claim.

Even if a plan is unquestionably not ERISA-governed, read the annuity contract or custodial-account agreement. In my experience, some older annuity contracts provide a survivor annuity, absent the spouse’s consent, and provide this even if no plan the contract was purchased under imposes such a provision.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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