401(k) Spousal Consent Question

[Guest arocket]

I have a situation where the participant recently died. She had a 401(k) and an interest in a life insurance plan through her employer. At the time of her death she was common law married to a man whom the employer/administrator was unaware. Therefore, at the participant's death, the benefits were paid to the beneficiary, her children from a previous marriage. My question is, does the administrator have any liability? What rightes does the common law surviving spouse have. Remember he did not consent to the other beneficiaries. Also, is a life insurance plan covered by the spousal consent rules? I do not beleive that it would be.

[jpod]

If the so-called common law spouse was truly the spouse, he is entitled to the 401k balance. This is a question of state law; many states no longer recognize the concept of common law marriage.

No federal law requires spousal consent to the designation of a non-spouse life insurance beneficiary (other than perhaps federal laws governing federal employees' life insurance programs).

[Guest arocket]

But to what extent can the employer/administrator disclaim liability for paying out the 401(k) benefits to the participant's children if they had not been advised of the marriage?

[jpod]

There is a provision in the ERISA Title I J&S rules (but not in the Internal Revenue Code's J&S rules) that says something like this: fiduciaries will be protected from liability under ERISA if they in good faith pay out death benefits to the wrong person, although the plan's fiduciaries will still have a fiduciary duty to try to get it back from the recipient. Whether any particular fiduciary is protected will depend upon the facts and circumstances of the particular case. However, I think this only protects the fiduciary from claims that he/she breached a fiduciary duty to the plan in paying the wrong person; I don't think this eliminates a surviving spouse's entitlement to his or her benefits.

[Guest arocket]

I can't seem to find that rule. Do you have any idea what section that is?

[jpod]

I had to go hunt for it myself. It is 29 USC Section 1055©(6) [section 205©(6) of ERISA, as amended]. Now that I've actually looked at it, I see that if ©(6) relief is available, it seems to protect the plan from claims by the surviving spouse, in which case I was wrong about that one point in my previous post.

[Guest mjb]

Before worring about ERISA liability first you need to determine if the state where the deceased lived allows common law marriage since very few states recognize common law marriage (TX, NC). Most states abolished CL marriage long ago. You can find the answer in the Martindall hubble compliation of state laws. Second if CL marriage is permitted you can ask the spouse for proof that that H & W complied with the terms for CL marriage e.g. cohabitated together for 3 years, held themselves out as H & W, filed joint tax returns, etc. Third how did the employee report their marital status to the employer e.g., W-4, heatlh ins, qual plans, etc.? If the employee filed as a single person there is no liability by fid for paying out beneficaries.