Newly terminated single participant dies before lump sum

[Guest crosseyetester]

A single participant with > 10 years service is terminating on 6/30 and is set to receive a lump sum on 9/1.

The question is will there be any benefit if she dies between 7/1 and 8/31?

The plan document seems to discuss what happens when a married participant dies prior to receiving benefits but not for single participants. However, there are two sections I am not quite clear on as I've never had to interpret them:

Election of Beneficiaries

Each Participant shall designate in writing in the form and manner prescribed by the Committee a Beneficiary to receive the benefits payable under the Plan by reason of the Participant's death if Sections 5.2 (Retirement Annuity Requirement) or 5.3 (Survivor Annuity Requirement) are not applicable....

Procedure in Absence of Election

Wherever provision is made hereunder for the payment of any death benefit not governed by Section 5.2 (Retirement Annuity Requirement) or 5.3 (Survivor Annuity Requirement) and there shall be no properly designated surviving Beneficiary, such benefit shall be paid to the following person or persons if they are living on the date of the Participant's death...:

a) Spouse; or, if none, then

b) Equally among the Participant's children; or, if none, then

c) Participant's estate

Thank you.

[Ron Snyder]

Why wouldn't there be any benefit? Is there a plan provision that says that vested benefits are forfeited upon death? I have only seen such provisions in plans that provide a death benefit through insurance policies in lieu of the accrued benefit.

The annuity distibution provisions are not applicable because he was single and had already elected a lump sum distribution. Had the participant executed a beneficiary designation form? If so, honor it. If not, the benefits should be paid to his children if he has any or to his estate if he has none.

[E as in ERISA]

I certainly don't know the answer. But it doesn't seem to me that there is an obvious one either. If the guy didn't waive the life annuity, then his untimely death could would make a difference. It certainly seems advisable for someone in ill health to choose a lump sum. But then it looks like a timing question. Which controls: date of election form, death, or annuity starting date. The EOB doesn't give a cite but Chap 6 V.B.1.g actually says that QPSA rules apply if the participant dies prior to the annuity starting date (before commencement of benefits). Did the guy waive the 90 day period? (Does that make a difference?) And if he didn't and hasn't waived the QPSA does that change the answer? Or does completion of the election automatically accelerate the "annuity starting date"?

[Guest mjb]

Under IRS reg 1.411(a)-4 a vested benefit can be forfeited on account of death before the benefit is paid if no survivor annuity is available. However the plan can provide that the benefit will be paid to a beneficary of a vested participant who dies prior to receipt of payment. You need to read the plan to see under what conditions a benefit is forfeited because of death before payment of benefits. If the plan terms are unclear the plan admin could make a decision to pay the benefits. The language of the procedure in absence of election is only intended to be a default bene provision but does state when a death benefit is to be paid if the participant dies before benefits will be payable (although it appears to assume that a death benefit is payable).