Allowing beneficiary to direct investment.

[FundeK]

Can any of you share your procedures pertaining to beneficiaries? I realize it should all be covered in the plan document, but I am wondering what the majority of plans allow.

Do you leave the funds under the participant's SS# or do you move the funds to a new account under the beneficiary's SS#?

Do you allow beneficiaries to direct investments? If so, do you require direction from the plan sponsor to allow this?

Any thoughts are appreciated.

[QDROphile]

Does the plan fiduciary wish to rely on ERISA section 404© with respect to investment of the account?

[FundeK]

Yes, they do. That means they need to allow beneficiaries the opportunity to direct investments, correct? Will they lose 404© benefits if they don't allow the investment direction?

[Jon Chambers]

Yes, you need to permit beneficiaries to direct account to retain 404© protection. And while I'm not an administrator, I generally see the beneficiary account moved to a new account under the beneficiary's SS#. Consider a QDRO, which usually splits the account. Without a separate account for the beneficiary, there would be no way to track this.

[Guest Lee68]

I realize I am resurrecting a very old post, but it is the closest I could find relating to a situation I am dealing with. Mine is very similar, we have a beneficiary who did not know their spouse's password. Our internal service department is stating that in order for the beneficiary to receive a password and access the account for purposes of changing investment elections, the account would have to be in their name.

Questions:

It it considered acceptable to rename the deceased account to the beneficiary?

What pitfalls are involved in doing so?

[QDROphile]

The account is the participant's account. What the record keeper calls it does not matter as long as it is administered correctly as the participant's account. Have some fun. Instead of naming accounts by participant name, give each account a nom d'account. Everyone will enjoy having dual idientity.

[Jon Chambers]

I realize I am resurrecting a very old post, but it is the closest I could find relating to a situation I am dealing with. Mine is very similar, we have a beneficiary who did not know their spouse's password. Our internal service department is stating that in order for the beneficiary to receive a password and access the account for purposes of changing investment elections, the account would have to be in their name.

Questions:

It it considered acceptable to rename the deceased account to the beneficiary?

What pitfalls are involved in doing so?

I would worry some about simply retitling the account. There are very specific timing rules pertaining to distributions on account of death. While I have no idea what recordkeeping system you are using, I presume it has procedures for tracking deceased participants and ensuring that the distribution rules are followed. While QDROphile's comment about the title on the account being meaningless is correct, simply retitling the account could lead to other unrelated errors (because once the account is retitled in the beneficiary's name, system users will believe that the account belongs to the beneficiary, when it really belongs to the deceased participant, and must follow rules relating to the deceased participant).

Conversely, I presume that your internal service department's requirement that the account must be in the beneficiary's name before a new password can be issued is an internal procedure, not a regulatory requirement. If you are certain that the participant is deceased, and that the beneficiary is the deceased participant's properly designated beneficiary, I see no legal or regulatory impediment to issuing a new password to the beneficiary. So your choice is to retitle the account in a manner that doesn't track reality, and could lead to other compliance issues, or to convince your internal service department that it should be acceptable under the circumstances to issue a new password to the properly designated beneficiary. Personally, I would lean in the direction of the latter approach.

Hope this helps,

Jon

[Guest Lee68]

Thanks for the posts. It does help.

[BG5150]

Most record keeping companies have forms that provide for the transfer of assets from a deceased person's account to a beneficiary (or beneficiaries). Usually, the paperwork is completed by the beneficiary and sent to the plan sponsor for authorization. Once the plan sponsor authorizes it, the transfer is done and the beneficiary can have control over that part of the money.

As for the naming of the accounts (I'm sure that QRDOphile's response was tongue in cheek, but...): True, the name ont he account doesn't really matter, but the underlying identifier of the account is the SSN. It is needed so proper tax reporting can be done. The account number and name are arbitrary, but it just make sense to keep the true name or the participant/bene attached to the account(s) for which the correct SSN is the identifier.