We have a situation where an unmarried participant died not having a named beneficiary for the 401k plan. However, they named a beneficiary for their life insurance benefits with the employer. It was their aunt. The Plan Administrator took it upon themselves to let the aunt know that there was a balance in the 401k account in addition to the life insurance benefit and approved a distribution to her, without any other paperwork (court order, etc.).
The Plan Document states that without a designated beneficiary the account balance goes to the participant's spouse (in this case there was none) and if no spouse to the estate. The estate did not go to probate and the Plan Administrator is attempting to determine if there are any other relatives etc that this may have needed to go to.
Would this be considered a prohibited transaction that needs to be disclosed on Schedule G as a non-exempt transaction?
