Practical Guidance Over Dispute of Proper Beneficiary

[Guest jhall]

Would welcome any thoughts on the following. Company 401(k) plan included participant who recently died. Decedent had a son by a previous marriage who she named as primary beneficiary of the 401(k) Plan assets. Second husband was named as contingent beneficiary of the 401(k) Plan assets. Decedent submitted a signed and notarized beneficiary designation form bearing second husband's signature.

Second husband is now claiming he has no memory or recollection of ever signing the beneficiary designation form and that it must have been forged. Never heard of the notary, no recollection of ever agreeing to waive his rights, etc. etc.

The 401(k) account is not that larg--$80,000--but enough for the husband to make a stink over. We suspect the husband simply forgot signing the designation and/or didn't really pay attention to what he was signing---was signed shortly after their marriage. As a result, the company believes the son is probably entitled to the assets but doesn't want to set itself up for a lawsuit.

I know there is a possibility of filing a federal interpleader action to protect the company and get it out of the middle of this mess but the company has never had to do that before. Wondering how involved and expensive of a process that is. Curious what sort of burden that puts on the presumably innocent son to have to prove his right to the benefits. Also wondering if anybody might have any experience as to other practical suggestions or work-arounds to handle without significant time and expense but that would also protect the company. Thanks.

[jpod]

There is no reason, and possibly no basis, for pursuing interpleader if you have a notarized consent form that you believe to be legitimate. Notaries are supposed to keep some sort of log book. Can you contact the notary and confirm that he or she still has a record of having notarized this document? If you get confirmation from the notary in writing, send a copy to the husband, and maybe that will make him go away. If he does not, there is a provision in Title I of ERISA that would protect the plan and the fiduciaries if you pay the $$ to the son, even if it is later determined that the notary was lying to you.

[J Simmons]

The Plan, however, is aware of the second husband's claim that his signature was forged. Having this knowledge before the payout to the designated beneficiary/son is made puts the plan on notice that perhaps the signature of the second husband is not valid. If the plan hazards payment under such circumstances to the son and later cannot retrieve it from the son, then the plan might have to pay the benefits again, this time to the second husband. The cloud of doubt has been cast over the validity of the signature of the second husband. I think this points to interpleader being the better course of action for the plan to take.

[Guest mjb]

why do you want to go to court when you can treat H's letter as a claim for benefits and review H's claim under the claims procedure of the plan and ERISA 503? Plan admin can treat any inquiry as benefit claim and dispose of the claim under 503 procedures. Filing interpelader is expensive and plan must pay the costs.

[Guest jhall]

I would like for the Plan to simply pay the benefits out without going to court but after reading the Atwater v. Nortel opinion, I suppose I am a little gun shy about just relying on general ERISA authority and the claims procedure process to think that everything will work out ok when, as noted above, the plan has clearly been put on notice that there could be a problem.

Although it's a different situation--no murder or anti-slayer statute issues here--I could see that district court (which would likely be our court as well) rebuking the plan if it turned out they paid money to the son and it was later determined that the son had indeed forged the beneficiary form. I note that the 4th Circuit, while supporting the Plan's ability to make discretionary determinations construing potentially disputed terms, seems to distinguish that from situations where plans have generally been put on notice of possible conflicting claims. I also see in EBIA where the DOL has informally suggested that interpleader is the only acceptable way to resolve a dispute between beneficiaries.

I like the idea about tracking down the notary and trying to leverage that. We have been trying to locate her but to no avail--it looks like she may have moved out of state as her commission has since expired.

Thanks for all the suggestions and ideas--would welcome any others as well, particularly any case law authority that would suggest there is no problem relying on the beneficiary form even if the plan has been put on notice of potential problems.

[Guest mjb]

Why not review both competing claims and allow both parties to submit information to the Plan administrator and then render a decision that allows the loser to appeal. I dont know what you expect as an answer. If you are afraid of a lawsuit by the loser then file an action in interpleader in Fed court and pay the legal fees but then there will be no risk to the plan of paying the wrong party.

[Guest jhall]

Why not review both competing claims and allow both parties to submit information to the Plan administrator and then render a decision that allows the loser to appeal. I dont know what you expect as an answer. If you are afraid of a lawsuit by the loser then file an action in interpleader in Fed court and pay the legal fees but then there will be no risk to the plan of paying the wrong party.

Thanks. I guess I had hoped for useful suggestions such as this one. . . but without the editorial commentary.

[Bob R]

That's probably the best advice you can get. I agree that you're on notice and shouldn't pay out the death benefit until this is resolved. You can either spend $$ trying to track down the notary to determine its validity or spend $$$$ using interpleader. And, if you use the interpleader, it could still require spending $$ to track down the notary. So, I'd opt for spending more money trying to track down the notary - one would assume the state would have some info on past notaries - and you use that info to track the person down using a locator service.