Power of Attorney Question

[FundeK]

Situation: Participant's spouse is deployed overseas for military duty. Participant would like to take a distribution from a plan with a QJSA requirement. Participant has POA for spouse (not sure yet if it is durable, limited, etc).

Is there any POA that would allow the participant to sign off on the QJSA waiver as the spouse to take a total distribution from the retirement plan? Does the POA specifically have to address the retirement plan?

Has anyone run into this issue?

[E as in ERISA]

The DOL answers a related question on its web site.

http://www.dol.gov/ebsa/faqs/faq_911_2.html

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?

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.

[FundeK]

I actually found that information too, but I don't think it applies in this situation. The person on military leave is not the participant, but the participant's spouse. The participant is trying to sign the QJSA waiver on behalf of their spouse.

[KJohnson]

I think you are right to be cautious. Q&A 27 of the (a)(20) regs sets out when consent is not required. The only instances where they list that the participant can give consent is where the spouse is "legally incompetent" and the particpant is the legal guardian.

Q-27: Are there circumstances when spousal consent to a

participant's election to waive the QJSA or the QPSA is not required?

A-27: Yes. If it is established to the satisfaction of a plan

representative that there is no spouse or that the spouse cannot be

located, spousal consent to waive the QJSA or the QPSA is not required.

If the spouse is legally incompetnent to give consent, the spouse's

legal guardian, even if the guardian is the participant, may give

consent. Also, if the participant is legally separated or the

participant has been abandoned (within the meaning of local law) and the

participant has a court order to such effect, spousal consent is not

required unless a QDRO provides otherwise. Similar rules apply to a plan

subject to the requirements of section 401(a)(11)(B)(iii)(I).

[mbozek]

There is nothing in ERISA which forbids a plan from accepting a valid POA which complies with state law. A-27 applies only when no consent is given by a spouse. Authority under a POA is valid consent because it conveys authority to act on behalf of the spouse to the attorney in fact. Some states (NY) have poa forms which permit the principal to spcificially authorize the attorney in fact to make retirement plan decisions. In other states generic language in the POA can authorize a waiver of benefit rights. You need to review the POA with counsel to determine it would permit consent to waive benefit rights under applicable state law. The plan admin could also obtain an indemnificaton/holdharmless agreement from the plan participant as insurance against a claim by the spouse.

[KJohnson]

I think if the regs were completely silent I would be more comfortable with a POA that met state law and general agency requirements supporting the action to be taken--interesting preemption issues aside. Like a POA, formal legal guardianship "conveys authority to act on behalf of the spouse" yet guardianship is listed in the regs while a POA is not.

The only thing I know of that is out there is Clouse v. Philadelphia, Bethlehem & New England Railroad Co., 787 F.Supp. 93 (E.D.Pa. 1992). which was an ERISA life insurance cas. The Court analyzed the POA under Section 37 of the Restatement (Second), Agency. The court adopted the Resatement as part of the "federal common law" (rather than state law) and found the general POA to be insufficient to change a beneficiary.

This is not a settled area by any means. If you are going to accept it, I agree that you should consult with an attorney to make sure the POA meets state law and general "agency" requirements as well as getting indemnification.

[jquazza]

I think Bozek is correct, as long as the POA is valid and grants sufficient authority to the attorney-in-fact to execute the document in question, it is just as good as if the participant signed it.

[401 Chaos]

I generally agree that the POA may provide sufficient authority to allow this but just wanted to point out that there generally is no legal requirement that you recognize or honor a POA. I routinely run into banks, brokerage houses, etc. that refuse to honor these in estate planning settings. And while I usually find that very frustrating, I think it pays to go slow and to err on the side of caution if you have any qualms about the authenticity or scope of the POA or the situation in general. I understand plans do not want to go out of their way to be difficult on these issues but at the end of the day the PA is the one bearing the risk.

[Guest Pensions in Paradise]

If in doubt, why not just require the participant's spouse to sign off on the distribution. The spouse is deployed overseas, not on the moon. I wouldn't be surprised if the spouse even had access to email, so you might be able to email the form to the spouse.

[mbozek]

PP: Are you for real. The spouse has more important things to worry about than consenting to a loan and email is not universally available to deployed troops in forward areas. The spouse signed the POA as recommended by the military legal officers advising deployed troops to avoid the hassle of giving written consent while deployed.

401: Acceptance of a POA is also a matter of state law. In NY all banks (but not brokerages) are required to accept the NYS statutory short form POA.

[Guest Pensions in Paradise]

mbozek - please get your facts straight. This issue has to do with a distribution, not a loan. While I agree with you that the spouse serving overseas has more important things to worry about, I've always taken the approach that I'm here to serve the plan sponsor, not to make things easy for participants. If there is any doubt about whether a POA is valid in this situation, why should the plan sponsor take any risk?

[FundeK]

FYI - We told the participant she had to contact her spouse and get him to sign the waiver.

[KJohnson]

It is not only a distribution it is a waiver of a QJSA benefit which is the one area specifcially addressed by the regulations. Therefore, I think there is some risk in simply stating the test as whether there is a valid state law designation of authority to act on behalf of the spouse. If that were the test, then why do the regulations specifcially mention guardianshp--a valid state law designation of authority-- but do not mention POA--another valid state law designation of authority?

There are probably a number of people on the Board that don't remember REA, but the mandated form of QJSA benefit and the protection of spousal benefits was a hot area of Congressional and regulatory concern.

All in all, it may just be a case of poor drafting of the regulation and DOL may think that a POA is perfectly acceptable but failed ot put it in the reg. However, some may take DOL inclusion of one form of deisgnation of authority-- that contains procedural safe guards and requires judicial action-- and their exclusion of another form of designation of authority that contains none of these protections as an indication of the level of formality that DOL wants if the spouse is giving up the QJSA benefit.

[Oh so SIMPLE]

Does anyone have any updated info or thoughts on the topic of this 2004 thread?

I am processing a QJSA waiver situation and the former employee has provided a Texas statutory durable power of attorney from his spouse that specifies the following relevant powers:

-Retirement plan transactions,

-Tax matters,

-Estate, trust and other beneficiary transactions.

Can a plan subject to QJSA accept a spousal waiver signed by the former employee pursuant to the power of attorney?

[Hojo]

I am currently dealing with this situation so any updated thoughts would be great.......