TEL

A transfer to even a grantor trust is a change in ownership, with the possible exception of a transfer to a trust of which the grantor is the sole trustee. Even then, how is the employer to know if the participant ceases to be the sole trustee? Although the beneficial interest does not change, title does change. I have no doubt that having the right to change ownership of the NQDC benefits will trigger 451 constructive receipt. Assignment would also violate 409A, because it would constitute a change of ownership by the plan participant before the date permitted by the plan and section 409A. There is no need for the participant to transfer ownership of the benefits. The NQDC program undoubtedly has beneficiary provisions. The participant can designate the trustees of his trust as beneficiary, thus ensuring consolidation of the NQDC benefits with his other assets and avoiding probate at his death. Treat the NQDC plan as you would treat an IRA, which would never be transferred to a trust.

The "spouse" must establish that she was married to the participant to become entitled to the account. The administrator should require her to provide a certified copy of a marriage certificate. The death certificate is not proof of marriage since it only reports the information provided by the informant. Even a joint tax return is not irrefutable evidence, but the administrator might decide to accept one signed by the participant. Before commencing a declaratory judgment action, the administrator should follow the plan's claim procedures, denying the "spouse's claim if she fails to provide the requisite proof of marriage (or denying the children's claim if she does). At the end of the claim appeal process, someone will have a right to sue for the benefits. The administrator could then bring in the other claimant and let the two sides battle. Finally, I would not jump to the conclusion that the costs of a court proceeding can be charged to the participant's account. The determination of the identity of a beneficiary is a fiduciary function that is probably a plan expense.