Time limit for electing optional form of benefit

[Guest krijowri]

A pension plan provides that the normal form of benefit is a 50% joint and survivor annuity. One of the optional forms of benefits is a 100% joint and survivor annuity. The plan provides that if a married participant elects an optional form of benefit but dies prior to the benefit commencement date, then the surviving spouse is entitled to receive the greater of the benefit elected by the participant, or the death benefit (50%) provided under the plan. I am currently dealing with a situation where a participant elected the 100% joint & survivor annuity. However, before she submitted all of the supporting documentation necessary to determine the amount of her benefit (e.g., husband's birth certificate, tax witholding forms, etc.), she unexpectedly died. The plan sponsor sent a certified letter to the woman's husband notifying him that the plan allowed them to honor his wife's election of the 100% joint and survivor annuity, but only if they received certain information (his birth certificate, her death certificate, etc.) from him within a certain time period. The husband missed the deadline for whatever reason but shortly thereafter sent the requested information, and now the plan sponsor insists he is only eligible for a 50% QJSA, rather than the 100% his wife elected. So my question is this: Given that the plan itself does not impose any sort of deadline, shouldn't the participant's (the wife's) election of the 100% joint and survivor annuity hold? Does anyone know of any legal authority that allows plan sponsors to impose these sorts of deadlines? The plan in question is a church plan, so it's not subject to ERISA; therefore, any non-ERISA arguments in support of or opposed to the deadline will be most helpful. Nonetheless, the plan typically operates in accordance with ERISA, so any ERISA-related guidance can certainly be taken under advisement. Thanks!

[J Simmons]

What harm or disadvantage to the employer (responsible for funding the plan) is there from the surviving husband not having turned in the info by a certain deadline? One month less of paying the 100% survivor annuity benefit? It seems that the deadline is arbitrary and serves no purpose.

[Guest krijowri]

I understand and agree with that (although the delay was several months, not just one). I'm trying to find a legal argument I can take to the client explaining why it cannot impose this deadline... I was hoping there'd be a letter ruling or court case, but I'm not finding it...

[Effen]

Since it is a church plan you could show them Luke 6:31.

"Do to others as you would have them do to you."

[Mike Preston]

Just flying from the seat of my pants, here, but if the plan isn't subject to ERISA, then it is subject to state law, right? It seems like the plan and the participant/beneficiary had a "deal" (contract?) and the deal, as it were, was to provide a 100% J&S. The church imposed some documentation requirements in order to cement the deal and imposed some time constraints on the perfection of those requirements. It appears that none of the contractual provisions (plan document, summary plan description, other?) include reference to these documentation requirements or, if they do, they certainly don't include reference to the time constraints. Hence, you would look to state law to see whether those requirements can be made a part of the contract between the participant/beneficiary and the plan by the plan in the absense of contractual provisions specifying them in advance, and you look to state law to see whether there are any restrictions on the ability of the church to impose non-documentated time constraints on perfecting those requirements.

Since I'm not a lawyer, I can't begin to say, one way or the other, whether the plan has the right to do what it is attempting to do. But a lawyer familiar with state law on contracts is where I'd begin my search.

[david rigby]

Given that the plan itself does not impose any sort of deadline...

Not to contradict any of the other responses, but make sure the plan does not already have some generic language that permits the "plan administrator" a certain amount of latitude in its day-to-day responsibilities. IMHO, imposing a reasonable deadline could be considered part of such responsibilites. Sure, there can be debate over "reasonable". Also, look for precedent.

[Guest krijowri]

Thanks for the posts - I had already looked into all of those suggestions. I believe the plan does not give the sponsor authority to do this, but this particular client is going to want to see legal authority. i was hoping for a case or something...I take it no one has ever come across anything to that effect. I'm not finding it either!