Beneficiary Designation

[Guest sextonro]

Plan participant retires from Company but does not take any distribution from his 401K plan. Participant named his two sons as beneficiary following a divorce in 2000 (with former wife as contingent beneficiary). Participant remarried July 2002, and separated 3 weeks after marriage, and spouse filed for divorce Jan. 2003. Participant commits suicide before divorce is final. Had no will. Just found out that ERISA automatically assumes spouse as beneficiary on his 401k plan. Probate Court appointed sons co-administrators of estate as spouse refused to pay any funeral or burial expenses. Entire burden of estate is place on the sons (ages 23 and 19).

How can this be challenged? Can this be considered as "abondment"?

Decedent was a Kentucky resident, spouse an Indiana Resident and lived in Kentucky less than 3 weeks. This was spouses sixth marriage.

Many Thanks.

[Harwood]

Start with the terms of the Plan document

[ljr]

You'll no doubt get details from several attorneys on this message board, but I believe a spouse is not a spouse for ERISA purposes until the marriage is a year old.

You also need to look at the plan document provisions because not all 401(k) plan automatically have the spouse as beneficiary. Some only require that the spouse be the "automatic" beneficiary for half of the proceeds.

Sounds like a real mess so hopefully not a lot of money is involved.

[mbozek]

If the plan has a provision requiring that the participiant be married for one year then the spouse forfeits the surviving spouse benefit and the designated bene (sons) will inherit the participant's benefits. See Reg. 1-401(a)-20 Q 26. If there is no one year provision then the spouse will be the beneficary since divorce actions are terminated at the death of one party and the parties were legally married at the death of the participant. Also if the plan is not subject to the funding provisions of IRC 412 then the entire vested account balance must be paid to the surviving spouse, not 1/2 of the benefit.

[Blinky the 3-eyed Fish]

Also if the plan is not subject to the funding provisions of IRC 412 then the entire vested account balance must be paid to the surviving spouse, not 1/2 of the benefit.

Actually, replace "not subject to 412" with "does not provide annuity options".

[Guest sextonro]

We have spoken to the Benefits Administrator and do not think the one year marriage rule is a part of this plan -- really sucks! Our attorney has requested a copy of the summary plan description.

I just want to know if there is any way to challenge this in court, especially with the circumstances of this marriage.

Thanks to all for replying.

[david rigby]

Who is "we"?

- Plan sponsor?

- TPA?

- Two sons?

etc.

[Guest sextonro]

The two sons.

[doombuggy]

I have seen a similar situation at my last job.

Participant died in suspious cr accident. Wife, who was not listed as the bene (benes were sons, under age, but wife did not waive rights), was under suspicion of accident, and was claiming the 4019k0 account. Father of dead participant was fighting for the account for the named benes (his grandsons). We advised the company to not release the account to either party until the case was heard in court. I don't know or remember the out come - this was several years ago.

I would give you the same advice ~ let the courts decide. it doesn't help when the family has bills to pay, though. Good luck!

[doombuggy]

I am looking in the ERISA Outline book for some answers on payments to benes other than spouse, and I think you might was to check out Ch. 6 Section 5 Plan Distributions, pages 6.168 & 6.169 (this is the 2002 edition).

[mal]

We had a similar situation that involved only $10k.

We told the two potential beneficiaries to either

work it out or we would file in interpleader action

in federal court. (This allows the plan to pay the money

to the court and back out of the picture...downside is

cost to the potential beneficiaries...legal fees eat

up the benefit.)

Once they agreed on a fair distribution, we had them

sign a waiver and release in favor of the plan

that came straight from the bowels of hell....

[mbozek]

I would be vary wary of not paying the spouse because of the sons's claims if the spouse is the legal beneficiary under the terms of the plan. If the spouse is forced to go to ct to receive payment that she is legally entitled to receive the plan could be forced to pay her legal fees. A few years ago a pension plan refused to pay a spousal benefit because of an unfounded belief that the spouse had abandoned the participant. The ct not only awarded the benefits to the spouse but ordered the plan to pay the spouse's legal fees. Interpleader is a viable option when there is a question as to who were intended to be the designted benficiaries under an benefit election form. Where the spouse is the designated beneficiary under both the law and the terms of the plan there is no uncertainty as to her right to receive the benefits.