Incarcerated participant - can spouse authorize distribution?

[Guest marciab]

The spouse of an incarcerated participant, with power of attorney, wants to direct a lump-sum distribution. Can the 401k plan allow this? If allowed, what's the tax implication?

[Guest marciab]

I'll follow-up on my own question after speaking to Corbel document support. The issue is not addressed in the plan document or specifically in any regs. Since the spouse has "general" power of attorney, not "limited", the reasoning is that the spouse is legally empowered to stand in the shoes of the participant and make any and all types of financial decisions. Likewise, the spouse has authority over tax issues affecting the participant. In essence, the participant is incompetent, so, the spouse can direct the cash-out. Of course, I welcome any other thoughts on the subject.

[J2D2]

Please pardon a (possibly) stupid question - Why can't the participant sign the paperwork? If the participant is simply (easy for me to say) incarcerated, not incapacitated, shouldn't he/she still be requesting the distribution?

[Everett Moreland]

Last time I researched this, there were two court decisions holding that a power of attorney is effective for an ERISA plan only if the power of attorney specifically references the plan.

[Guest marciab]

It does cause one to pause . . . He's not disabled, mentally impaired, missing, etc., but he has assigned his wife power of attorney. She can sell their home, transfer securities, remove contents of a lockbox, cash a social security check, and more as his legal representative. Hopefully, she's acting responsibly. The plan sponsor doesn't have assess his status, but does have to comply with the legal directive.

[david rigby]

Some of the prior discussion threads that may be relevant. In the first link, Everett provides some of his research:

http://benefitslink.com/boards/index.php?showtopic=20346

http://benefitslink.com/boards/index.php?showtopic=24738

http://benefitslink.com/boards/index.php?showtopic=22251

[Guest marciab]

Thanks for the additional info.