Participant in prison , wife and father each have a power of attorney and want to withdraw full amount

[Jim Chad]

An attorney called today with this problem looking for ideas.

Participant is in prison and both father and wife have gone to employer with a power of attorney to withdraw full account balance. The father than came back with a letter from the Participant stating that he had cancelled his wife's power-of-Attorney. No divorce is in progress that we know of.

Does anyone have any suggestions for him?

[Harwood]

Does the power of attorney document reference the plan name or specifically state that it applies to distributions and actions regarding an ERISA qualified plan?

If there are no specific references to a qualified plan, the power of attorney can be rejected, even if it is a blanket POA that says it applies to everything.

[mbozek]

A principal who grants a Power of attorney can always revoke the power of the agent in accordance with state law provisions. You need check state law to determine how a power of attorney can be revoked, e.g. by letter to the agent, etc.

[Alan Simpson]

Why not just have the participant, even though in prison, complete the distribution forms. Nothing says that he can't complete the forms himself.

[Guest JDansa]

I found this thread interesting because we never thought about the use of a Power of Attorney to obtain a distribution. Could someone please explain or verify that it is permissible to use a POA to get a distribution? Could a POA also be used in a situation where spousal consent is required under the plan (i.e., POA used as spousal consent)?

[Guest PeterGulia]

In preparing to get your lawyer’s advice, you might consider the following as part of a general background of information.

If the plan is an ERISA-governed plan, ERISA preempts State laws. A first step is for the plan administrator to read the plan and any relevant plan-administration procedure.

At least for a participant who is not incapacitated, nothing in ERISA requires a plan to recognize agents at all. And an ERISA plan administrator may set its own standards for what power-of-attorney it might recognize and how the plan administrator will construe or interpret the agent’s powers. See Clouse v. Philadelphia Elec. Co., 787 F.Supp 93 (E.D. Pa. 1992).

For general background on construing a power-of-attorney, see Restatement (Second) of Agency § 37. If a plan administrator has not adopted its own procedure for deciding what powers are provided by a power-of-attorney, a plan administrator might consider that, instead of considering any preempted State law (which a court should not do), a court might look to the Restatement as a suggestion for the Federal common law of ERISA.

If the plan permits at all an agent to act for a participant, a plan administrator might want to resolve a doubt about who is duly appointed as the agent by asking the participant to confirm, in a sufficiently controlled writing, who is the participant’s agent.

If the plan administrator considers any claim for a distribution to the participant other than as a qualified joint and survivor annuity, it would check that the plan does not require a QJSA or that it has received a qualified election supported by the spouse’s notarized consent.

If a distribution is not involuntary, the participant might consider whether continued investment under the plan could be more advantageous than other investments available to him. Prison rules often result in significant restrictions.

[E as in ERISA]

I think that the DOL recognizes that POAs are governed by plan terms: See the FAQ on reservists (http://www.dol.gov/ebsa/faqs/faq_911_2.html), which says --

Q. I am a participant in a 401(k) plan. While I am on active duty, may I give my spouse or another individual the authority to change my investment allocations through a POWER OF ATTORNEY or other legal document? Can that individual also apply for a participant loan or hardship withdrawal on my behalf?

A. THE TERMS OF THE PLAN WOULD GENERALLY GOVERN THIS SITUATION. However, if some employees are permitted to designate individuals to act on their behalf in other contexts when they are away from work, the employer should permit the service member to designate someone to act on his or her behalf also.

[TPApril]

Interesting thread. I'm curious to know how it was ultimately resolved.