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Here's my two cents on the OP's question. Taking into account the facts @Santo Gold has provided and assuming they are accurate, the plan administrator may want to do the following: Wait for a claim to be filed (see @Peter Gulia) or a request for information is made. If a potential beneficiary or estate representative makes a claim or requests information, the plan should provide them the information required for them to make a viable claim. Here, the proper question is being asked in the OP. The company must take care regarding who is actually entitled to receive communications or information about the benefit. Under the terms of the plan as quoted above (assuming the Adoption Agreement does not have a specific provision), the plan can only provide information to the decedent’s spouse, child, or estate representative. The plan must ensure that it gets any and all necessary documentation to identify that it is providing any detailed benefit information to a person who is authorized under the plan to receive that information. Perhaps, the first thing that should be requested from a person who states they are going to make a claim is for them to provide the plan a copy of the decedent’s death certificate. Usually if that person is a spouse, child, or estate representative, they should have access to the decedent’s death certificate. If they cannot provide one, we have advised plans to simply provide them the Plan’s SPD and point them to the provisions as to how to make a claim. Then tell them that to make a claim they need to provide a copy of the death certificate and documents supporting their status as a beneficiary (i.e., under the OP’s plan: the spouse—marriage certificate with decedent as spouse, child—birth certificate with decedent as parent, estate rep—letters testamentary, of administration, or of authority, depending on state law, etc.). If using a small estate affidavit, we would require an original notarized affidavit, certified by the clerk of court of the decedent’s last county/parish of primary residence, certified or long-form death certificate, government-issued photo ID, and proof of relationship (the plan would then request their attorney determine if the affidavit meet's applicable state law). In conjunction with these actions, the plan administrator, at a minimum, should check its other plan records for helpful information (e.g., group term life plans, welfare plans etc. for dependent or beneficiary info, if any) and have someone obtain a copy of the decedent’s obituary, which normally is available online and would list the decedent’s living relatives, if any. If there is a question concerning whether a spouse exists or an individual is the legal spouse, the plan administrator could also do a search of the marriage and divorce records in the county or parish in which the decedent had their primary residence. The clerk of court in that county or parish usually has a digital database that can be searched or procedures to request certified copies of these records. In some states, state vital records offices can provide one or both of the certificates. Also some states have services such as VitalChek, which partners with state and local government agencies to provide these documents. Searches for potential children are more complex and might be impractical. If the plan receives any information indicating there may be multiple beneficiaries or conflicting claims, it may want to notify the other potential beneficiary(ies) that a claim has been made for these benefits and they may wish to file a claim. They might not… we have had instances where a beneficiary did not make a claim for benefits for which they were the rightful recipient, attempting to bypass the tax consequences (e.g., a spouse did not want the benefit but wanted it to go to their children (a disclaimer in that instance would not have achieved that effect)) and the plan could not make the distribution based on the children’s claim for benefits (first, it had actual knowledge there was a spouse and, second, even if the spouse was considered deceased, the benefit would have went to the estate and not the children). Once the proper recipient of the plan account balance has been determined, the plan would notify the individual (or the executor, if it’s the estate) that they have the right to the benefit and give them the information they would need to apply for benefits to commence (copy of SPD and/or distribution forms) or detailing their abilities to leave money in the plan and when the latest date they can take a distribution. Depending on who is determined to be the proper recipient, the plan should request Social Security numbers and/or IRS Form W-9. Caution--Any distributions paid to the executor of an estate should be made payable to “[Name of Executor], as Executor of Estate of [Name of Employee]” or simply to “Estate of [Name of Employee]” (or a similar variation or a variation required by your plan recordkeeper). Any distributions paid to the deceased’s heirs under a small estate affidavit should be divided among the named heirs and paid directly to each of them. While the IRS rules normally allow beneficiaries to elect to rollover a qualified plan death benefit to an IRA (to avoid withholding taxes on the distribution), neither an estate nor the heirs listed in a small estate affidavit can elect a rollover distribution. The key legal proposition here is that ERISA Section 514(a) explicitly preempts state laws that “relate to” an employee benefit plan that is subject to ERISA, with limited exceptions for certain insurance, banking, and securities laws. Courts have interpreted this preemption language to mean that any state law that refers directly to an employee benefit plan, or that bears indirectly on an employee benefit plan, is not enforceable against an ERISA-governed employee benefit plan. See Egelhoff v. Egelhoff (essence--terms of the plan govern). The only state law that should be consulted is the law that supports the claimant’s status as spouse, child or executor/administrator/estate rep. FWIW, if a plan that has an order of precedence for designating beneficiaries as set forth in the TSP as noted above were presented to us by a client, we would vehemently recommend immediately amending that provision. Our view is that in no way should a plan take on the responsibility of making legal decisions under any state law. If the question is of immediate concern, like here, and we would not amend the provision to cover the instant decision, we would try to find a way to throw this into court and/or make someone else make the legal determination. (Note that the determination of who should receive these amounts under the laws of descent and distribution is the executor of the decedent’s estate.) Also, the plan administrator should ensure that they checked the plan terms to see if any employer contribution (matching, profit sharing, or other non-elective contribution) is due to the employee for the year of death. Some plans require that an employee normally be employed on December 31 or have completed 1,000 hours of service during the year to receive an employer contribution, but often those requirements are waived if the employee dies while employed. Also, confirm that the account uses the proper vesting as death often accelerates vesting. Not advice, just my two cents (does this idiom still have meaning as the penny is no longer being minted?)

You're spot on, actually. Failure to follow the plan document, for starters....

A situation that can become an infinite loop when a claim is in the wings but is not ripe to be made. For example, a QDRO-in-waiting that has not yet been submitted for qualification because a sponsor/participant's estate (which has already submitted letters testamentary to the TPA and stands in the shoes of the deceased sponsor/participant), cannot get the TPA to provide a current account statement. I have a client with that very issue right now (you may recall I'm a QDRO lawyer). Trustee sponsor/participant of very small plan dies after the court enters a property settlement, scant paper records in the decedent's estate, no copy of an executed beneficiary form; estate counsel pretty much ERISA-clueless. Sponsor company has a DC plan TPA'd by one firm, and a cash balance plan administered by another TPA. The cash balance TPA won't pony up a current account statement to the estate administrator/PR, so neither the estate nor the alternate payee for that plan can ascertain what exactly is there that is divisible between the estate and the alternate payee. Then, instead of providing a current account statement and their QDRO procedures document, the TPA decides, unbidden, to retain its own counsel to write a QDRO for the alternate payee (!), which, shocker, does not allocate the full components of the benefit, though nothing in the plan document prevents full allocation. (Of course, I would not allow my client to sign such an abomination.) Additionally, the cash balance TPA's benefit statement from several years ago (the only statement the estate has), is labeled for the sponsor's DC plan (the one administered by a different TPA), includes a single line item for the cash balance plan without identifying that plan as distinct from the entire rest of the statement. This is not a small-estate matter and there is likely 500k+ in the participant's hypothetical account. In 30 years of practice, I have never seen a TPA screw up this badly. I'm counting the misrepresentations, fiduciary breaches, and prohibited transactions, and wondering when they'll stop shooting themselves in the foot before I sue their pants off, as they're not listening to reason. Thank the stars original poster Santo Gold has the wits to ask their learned colleagues here for their thoughts when unsure.

Client firm is a Real Estate Broker. The Plan is a 401(k) Plan which covers ONLY the owner and wife, who are both active in the business and the only employees of the firm. Outside of the Plan they are involved in various real estate speculations, and do rather well with these investments; which is why they want to expand their use of real estate under the 401(k) plan. Currently they do have two real estate investment which are solely under the Plan (no involvement of business, or commissions to the firm, with annual independent valuation). I note that they do have other investments under the trust so it is diversified. Anyway, they now want to use the trust's real estate assets in a "cash out refinance" of the 2 real estate investments, to obtain funds which will be used to improve the properties, and possibly buy additional properties. To clarify, it seems that what they are intending to do is get mortgages against the 2 properties (currently owned 100% by trust fund), and use those funds to improve the 2 properties owned, and perhaps to purchase more real estate under the trust. It is expected that this will not involve any monies outside of the trust, and that all proceeds will remain in the trust. However, I suspect this is a prohibited transaction since they are using the two properties owned as collateral for the mortgage loans they take out against those two properties. I also suspect that this will be a PT for other reasons, but am not sure how or why. I greatly appreciate any and all comments and suggestions. Thank you in advance!

Generally, no, that would not be allowable as it (deposit timing) would be a discriminatory BRF. Maybe 6% owner PS and 0% NHCE PS deposited throughout the year would be OK but as you say, there's no guarantee it would pass testing. If more NHCE PS is then required, would that create retroactive BRF discrimination? Maybe, probably would not know unless and until audited, if ever. Certainly going more than 6% is not a good idea. How important is getting that extra 6% in sooner compared to the possible risk? You can communicate the issues and, where there may be compliance ambiguity, the owner can decide how to proceed and accept any risk (but get it in writing). Another concern may be if PS provision has any conditions for entitlement in the document.

For an ERISA-governed retirement plan, a situation in which, without another valid beneficiary designation, the plan-provided default beneficiary is the personal representative of the decedent’s estate, the plan’s administrator decides what evidence persuades the administrator to approve a claim. A State’s law might be relevant in, and might support, an administrator’s fact-finding and decision-making about who is or isn’t a personal representative, and about whether the plan’s obligation to pay the decedent’s personal representative has been satisfied. Yet, the claims procedure and a fiduciary’s decision-making are governed by the documents governing the plan, including an ERISA § 503 claims procedure, and ERISA’s title I. Many administrators look for “letters testamentary” or “letters of administration”, or some other court order that grants or recognize a person’s authority to act for the decedent’s estate. And some administrators use further steps designed to test whether what’s presented as such a record or certificate is authentic or a forgery. Some administrators might act following a claimant’s small-estate affidavit if it meets the conditions under a relevant State’s law and meets any further conditions the plan or its administrator imposes. Other administrators do not consider a small-estate affidavit. (For a background, including views that might differ from some of my observations, see https://benefitslink.com/boards/topic/63408-does-a-plan-pay-on-a-small-estate-affidavit/.) If a plan’s administrator has not already done so, it should design, with its ERISA lawyer’s advice, a procedure for these situations—a procedure the administrator is ready to apply regularly, uniformly, and impartially, with no more than prudent plan-administration expense. An obedient and prudent fiduciary follows one’s claims procedure (except insofar as it’s contrary to ERISA’s title I or other Federal law). This is not advice to anyone.