Surviving Spouse Beneficiary

[Guest TimO]

An input or direction is appreciated -- I have a client that sponsors a profit sharing/401(k) plan. A plan participant named his wife as his beneficiary. He subsequently divorced and changed his marital status to single and his primary benficiaries to his two children.

He then remarried but never notified the plan sponsor. He subsequently died and the sponsor paid the death benefit to his two children, the beneficiaries on record. Now the new wife is asking where her benefit is.

I am inclined to direct the sponsor to their attorney, but I wanted to at least give them some idea of what they need to do. Does anyone have any idea how this issue is treated? Any starting point would be helpful.

[chris]

If you represent the plan sponsor, or are the plan sponsor's agent, you probably shouldn't do any more than just direct her to her attorney. From her perspective, the plan paid out to the wrong beneficiary and now may be subject to recouping that money from the children as well as paying her. Given the position the plan sponsor may find itself in, I don't think you need to be advising the spouse on anything. You should refer it to the plan sponsor's legal counsel, or your counsel, if you are the TPA?...

[JanetM]

What does the plan say about the beneficiaries? Start there and see if they have violated terms of plan.

[Guest TimO]

Thanks Chris. Sorry, I could have been more clear. I am the TPA and my client (the sponsor) is asking me what they should do. I agree that this sounds like one for their counsel. I think they want my advice since it is surely much cheaper than their attorney's (though not worth as much..)

[chris]

Typically, the surviving spouse is required to receive the death benefit. The subsequent remarriage voided the beneficiary designation. Thus, the plan sponsor needs to be ready to recoup the money from the children and pay the surviving spouse. Depending on how the recoupment works out, the plan sponsor may end up paying twice. There may be an issue re no notice of the remarriage, but not sure. Did the surviving spouse just happen to show up? Did the plan sponsor have any notice that the participant had remarried, e.g., other e/ee benefits offered such that the plan sponsor should have known about the marriage, i.e., participant added spouse onto e/er provided coverage, etc....? There are others on this board who have probably dealt with this issue before who can add to the above....

You may want to post on other areas of the message board.....

[Guest TimO]

Thanks Janet and thanks for the follow up Chris. That is good stuff. We looked at the plan document and it looks like the beneficiary election he made when he was single became void when he married. Ouch. It appears that the spouse is automatically the beneficiary (spousal waiver required, etc..). This is not great news for the client. I think I have enough to go on now.

Again, thanks for the input.

[EmpbAF]

Hi, I wanted to bump this question to the top again. I have a similar situation with a client. Does anyone have any insight on whether the lack of notice of the new spouse affects anything? 

And if not, is the correction simply to pay the current spouse and try to recoup the money from the children?

[jpod]

There is nothing in the law or the regulations to suggest that the lack of notice is relevant, and I wouldn't expect that there is any case law supporting the notion that the lack of notice changes anything.  The plan administrator/sponsor or whoever else was responsible for this has a big problem it brought on itself by not undertaking appropriate due diligence.  Like, for example, what did the death certificate say about marital status (or was a death certificate not even requested)?  Even if the death certificate was erroneous in that regard, it wouldn't change the fact that the surviving spouse is entitled to the money.   Depending upon the facts the relevant plan fiduciary may be shielded from liability for breach of fiduciary duty, but that doesn't change the fact that the surviving spouse is the beneficiary.  

[Peter Gulia]

The originating post's description of what happened illustrates why a retirement plan's administrator should design its claims form and claims procedure to collect all facts the administrator needs to make fully informed decisions on claims.

 

[401_noob]

it may be worthwhile seeing if the Plan uses the one-year marriage rule and also seeing if the participant and the spouse were married for more than a year.