Misrepresentation of marital status-what are the sponsor's responsibilities?

[AndyH]

Situation: DB plan for large employer. Plan subject to QPSA and QJSA rules. How should the employer handle an employee's representation of marital status?

May the employer rely upon the representation of the employee?

Is there anything in print on this subject other than common sense? I expected to find something in 1.401(a)(20) but there is nothing on point.

Clearly many plans require evidence of marriage, but what about the reverse?

Question is coming from the sponsor. Any help would be appreciated.

[david rigby]

You don't say what the "misrepresentation" was, or how you know it was false. IMHO, this is an issue for administrative procedures.

For example, suppose the EE was not married but claimed to be married in order to provide a J&S benefit to someone. Can the plan's admin procedures, and the election form(s) signed by EE and/or "spouse", include language enabling the plan to adjust the benefit at a later date if the EE presents information known to be false? Perhaps the plan already contains some language that will help with the immediate situation.

[AndyH]

Actually, the sponsor is concerned about allowing a participant to state that he is not married and take, for example, a life annuity. Later a spouse surfaces and makes a claim for a death benefit.

A specific concern is about a common law marriage. Suppose a participant claims to be unmarried and later it is determined that there was a common law spouse. Does this become a liability of the sponsor? Is there anything that can be done now to insulate against that.

Currently an application form is used whereby a payee provides general information including whether or not they are married, and if so, their spousal information. Then the election form contains a spousal consent section that allows a participant to state that he/she is not married.

I agree that this is administrative. The question is if the sponsor has anything to hang their hat on and say that they were legally allowed to rely upon a representation.

This question might be more common for a plan with a lump sum provision. What is to prevent a person from stating that he/she is not married and taking the money to the casino? What should the sponsor have done if anything other than rely upon the representation of the employee?

[rcline46]

The sponsor made have information from their health or insurance plans, or by word of mouth from other employees.

This is not to say the sponsor should actively pursue the matter, but review the information they already have.

[david rigby]

No expert I in this area, but I thought there are prior examples (either case law or DOL/IRS comments). Anybody have any cites?

As rcline suggests, the ER may have other sources of information (especially medical insurance or beneficiary designations) that can help. But comparing/reviewing such information may be easier said than done.

Gray Book Q&A 94-28

Proof Required to Avoid Spousal Waiver of QJSA or QPSA -- 401(a)(11), 417

Reg. Section 1.401(a)-20 (Q&A-27) provides that spousal consent to waive a QJSA or QPSA is not required if the plan representative is satisfied that there is no spouse or that the spouse cannot be located. In establishing to its satisfaction that there is no spouse due to divorce or legal separation, is the participant required to provide legal proof of the divorce or legal separation?

RESPONSE:

The plan administrator may rely on a certification by the participant that he is divorced or legally separated. However, it would be a good idea to request legal proof in situations where the employer has knowledge that indicates or suggests that the participant is married.

Copyright © 1994, Enrolled Actuaries Meeting

All rights reserved by Enrolled Actuaries Meeting. Permission is granted to print or otherwise reproduce a limited number of copies of the material on the diskette for personal, internal, classroom, or other instructional use, on the condition that the foregoing copyright notice is used so as to give reasonable notice of the copyright of the Enrolled Actuaries Meeting. This consent for free limited copying without prior consent of the Enrolled Actuaries Meeting does not extend to making copies for general distribution, for advertising or promotional purposes, for inclusion in new collective works, or for sale or resale.

[AndyH]

Thanks, pax, that is what I was looking for, something in print that says that. It would be even better if there was some authority cited. Absent some authority, why would an IRS representative make that statement?

And rcline, you are right of course, but the question actually originated from one of the sponsor's other benefit plans and was then extended to the pension plan. But again I'm looking more for a legal citation or written comment (or case law) than a suggestion on what is prudent.

Or maybe of course I could cite a written opinion from a recognized international authority such as Blinky the 3 Eyed Fish or quinn the car fixer.

[david rigby]

Absent some authority, why would an IRS representative make that statement?

Technically, the IRS does not make any Gray Book responses. Here is the introductory paragraph to the 1994 edition. Note the reference to "summaries of the answers":

The following pages set forth the questions posed to Staff of the Treasury Department and the Internal Revenue Service at a meeting on February 10, 1994 with representatives of the Enrolled Actuaries Program Committee.  Included also are summaries of the answers to those questions.  The summary answers to the questions are intended to reflect as accurately as possible the statements made by the government representatives.  However, this material does not represent the official position of the Treasury Department or the Internal Revenue Service or of any other governmental agency.  Moreover, neither the Treasury nor the Service has in any way approved this booklet or reviewed it to determine whether the statements herein are accurate or complete.

[Belgarath]

I'd check with an attorney versed in these matters. Sal has a reference - In Hearn v. Western Conference of Teamsters Pension Trust Fund, 68 F.3d 301 (9th Cir. 1995) the plan was required to provide a survivor annuity to a participant's spouse where the plan administrator had reasonably relied on false statements made by the participant that he was unmarried. However, the survivor annuity was reduced by the value of overpayments made to the participant under the life annuity he had elected.

[Guest Pensions in Paradise]

Sorry, but am I missing something here? Other than a signed statement from the participant, how could a participant prove to the plan administrator that they are NOT married?

[Blinky the 3-eyed Fish]

I say that you look at their ring finger. If there is no ring, then you have all the evidence you need. Andy, is that the kind of authoritative opinion you were looking for?

[mbozek]

Hearn was decided under ERISA 205©(6) which requires that the fid act prudently in determining that a participant is not married. If the plan admin acts prudently then the plan can reduce the survivor benefits by the amount of the excess payment made to the participant.

[AndyH]

Blinky, no, silly you, in Massachusetts you also must check men for earrings.

Paradise has a point. Hmmm.

And thanks B&mb for the cite and comment, because the correction is another side angle to this question.

And I am told that the client did solicit competent legal advice and the lawyer suggested that having a representation made when the employees "enroll" in the DB plan would be advisable. I suppose the "enrollment" happens when they picked from the 64 self directed mutual funds and hook themselves up to the daily valuation system. Otherwise, since the plan has only a REA death benefit, that "enrollment form" is a bit short.

[david rigby]

Asking for marital status at enrollment/participation/hiredate and assuming that status remains applicable at a later severance of employment might not be considered prudent.