Plan is saying estate is beneficiary and not spouse

[Guest AbbyP]

Wife named husband as beneficiary of her retirement account.

Wife died. Plan is insisting that estate is the beneficiary of her account and not her husband. They say:

Client elected to receive lump-sum payment of her benefits, beginning one day after her retirement date

She dies after completing and submitting the request to the plan, which had a annuity start date that came about for a date after she died.

The plan was notified of her death before they issued the check. Still, they issued it in her name, FBO her IRA.

Spouse returns the check to the plan, asking for it to be issued to him. They refuse and issue it to her estate. They claim that her estate and hot him, is her beneficiary.

They claimed she elected a Lump-sum sum optional form of benefit, with no beneficiary benefit. Her spouse consented to the annuity waiver, thus allowing the lump sum. However, they are claiming that her estate (and not her spouse) is her beneficiary because:

------- For beneficiary, they define as someone named by the participant to receive survivor benefits, who much qualify on the annuity starting date.

------- She died after her annuity starting date, therefore no benefit is due to her named beneficiary.

Can there legally be such a provision in a plan?

~~~~~~~~~~~~~~

Using different name to protect client.

[J Simmons]

You need to consult a knowledgeable ERISA Attorney in your area as soon as possible. The outcome depends on plan language, per Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, decided by the U.S. Supreme Court on 1/26/2009.

[Guest AbbyP]

Thanks J,

That seems to be about divorce ( the case you mentioned). Can it be applied in this case?

[jpod]

Assuming this is a plan subject to ERISA, isn't the key question whether the employee died "before the annuity starting date?" ASD is a defined term and the regulations should lead to the correct answer. If employee died before the ASD, spouse gets it, period, unless spouse had consented to a different pre-retirement death beneficiary. If employee died on or after ASD, I suppose plan language would control.

[J Simmons]

Thanks J,

That seems to be about divorce ( the case you mentioned). Can it be applied in this case?

It applies for the proposition that what the plan documents say is the critical determinant.

[J Simmons]

... ASD is a defined term and the regulations should lead to the correct answer. If employee died before the ASD, spouse gets it, period, unless spouse had consented to a different pre-retirement death beneficiary. ...

I think that's close to the crux of the OP's question: did the spouse (the death beneficiary) waive that death benefit by consenting to a payout to EE just before the EE died--making the benefits payable to the EE's estate rather than to the spouse? I think that will depend on an application of what this plan's documents specifically provide, and the plan administrator's interpretation of those. Depending on that language, the plan administrator might consider waiver of survivorship rights to waive the spouse's rights as a death beneficiary as well.

[Guest AbbyP]

... did the spouse (the death beneficiary) waive that death benefit by consenting to a payout to EE just before the EE died...

Yes. The spouse did

[J Simmons]

... did the spouse (the death beneficiary) waive that death benefit by consenting to a payout to EE just before the EE died...

Yes. The spouse did

Whoa, not so fast. That's where the plan language and plan administrator's interpretation comes into play. The spouse has two interests under the plan. One is to a qualified preretirement survivor annuity or qualified joint and survivor annuity. (The spouse clearly consented to the waiver of these forms of survivorship annuities from what you originally posted.) The other is as the employee-designated death beneficiary. It was not necessary that the spouse waive that designation as death beneficiary in order for the survivorship annuities not to apply, clearing the way for the lump sum distribution that had been elected but not paid by the time of the employee's death.

So the question is whether the waiver that the spouse did sign not only applies to the survivorship annuities, but perhaps also to the death benefit payable in whatever form. That's where the plan language and the plan administrator's interpretation will have to come into play.

[Bird]

This is a tough one. I started to write that the plan is clearly wrong about paying to her estate, but she did request a lump sum, and her husband consented, so it makes some sense to follow through on that request. But I don't know why they would add the FBO IRA to the check to the estate; that makes no sense to me.

And I think the annuity starting date is the actual payment date, so they haven't reached it. I'm pretty sure that since they did not cut the check before she died, that all of the paperwork becomes moot, so they have to pay to the plan beneficiary. J. Simmons makes good points, especially about exactly what the spouse did or did not consent to, but most especially about getting competent ERISA counsel.

[Belgarath]

Hi Bird - I'm temporarily going off-topic, but it does illustrate a potential point in this situation. I play golf (well, ostensibly golf - more like "a good walk spoiled") with a claims examiner for an insurance company. We were discussing what happens if someone sends in a surrender form for a life insurance policy, but dies before the company receives it. I was somewhat shocked when he told me that the cash surrender value is all that is paid - if the surrender form was valid - executed properly, etc. - then the life insurance is no longer in force as of the time the form is signed.

Now, this may vary depending upon company to company and state to state - I have no idea. But it does illustrate a point similar to JSimmons' information that the signing of the forms may indeed be the determining factor IF the plan language/PA interpretation support it.

The intricacies of the law never cease to fascinate (and occasionally disgust or elate.) Like you and everyone else, I'd ship this question off to counsel ASAP. I'd be interested to hear how this is ultimately resolved.

[mbozek]

Wife named husband as beneficiary of her retirement account.

Wife died. Plan is insisting that estate is the beneficiary of her account and not her husband. They say:

Client elected to receive lump-sum payment of her benefits, beginning one day after her retirement date

She dies after completing and submitting the request to the plan, which had a annuity start date that came about for a date after she died.

The plan was notified of her death before they issued the check. Still, they issued it in her name, FBO her IRA.

Spouse returns the check to the plan, asking for it to be issued to him. They refuse and issue it to her estate. They claim that her estate and hot him, is her beneficiary.

They claimed she elected a Lump-sum sum optional form of benefit, with no beneficiary benefit. Her spouse consented to the annuity waiver, thus allowing the lump sum. However, they are claiming that her estate (and not her spouse) is her beneficiary because:

------- For beneficiary, they define as someone named by the participant to receive survivor benefits, who much qualify on the annuity starting date.

------- She died after her annuity starting date, therefore no benefit is due to her named beneficiary.

Can there legally be such a provision in a plan?

I think the plan was within its rights to make a death benfit payment to the employee's estate providing the plan language support such a result. H had no right to receive payment from the plan since he had waived his rights to benefits under the plan prior to W's death.

The big mistake was made by H in returning the check to the plan adm instead of getting appointed executor of W estate and depositing the rollover distribution in W's IRA which he would be permitted to do as her personal representative. If he was her beneficary under the IRA he would have received the funds anyway. Was someone else designated as beneficiary under W's IRA?

[Bird]

I think the plan was within its rights to make a death benfit payment to the employee's estate providing the plan language support such a result. H had no right to receive payment from the plan since he had waived his rights to benefits under the plan prior to W's death.

As has been noted, we don't know if the spouse's waiver permitted a particular type of distribution or not, and that needs to be determined.

The big mistake was made by H in returning the check to the plan adm instead of getting appointed executor of W estate and depositing the rollover distribution in W's IRA which he would be permitted to do as her personal representative. If he was her beneficary under the IRA he would have received the funds anyway. Was someone else designated as beneficiary under W's IRA?

A giant leap was made from paying a lump sum to the participant, to writing a check to the estate, FBO her IRA. It's almost like this is a trick question - what about withholding, was that done, as would have been required under the original election, and did they just write the balance to the estate/FBO the IRA, or was it all arbitrarily paid to the estate, FBO her IRA? Either way, it's flat-out wrong, no matter if the husband is the IRA beneficiary and would be pleased with the end result.

[mbozek]

1. Why wouldn't it result in a waiver since the spouse is waiving all rights to a distribution of benefits due the employee on the date the waiver is executed?

2. Where do you see the IRA being paid to the estate of the employee? I read the OP's statement to mean the plan sent out the check payable to the employee c/o the custodian FBO the employee's IRA, which is the conventional way making a direct rollover of a lump sum payment to an IRA since the plan would not have any authority to change the payee designated by the employee after her death. Perhaps the OP can enlighten us as to who the payee actually is. In any event if the payee of the distibution check is either the employee or the custodian of the employee's IRA FBO of the employee, the executor can roll over the distribution to the employee's IRA.

[Bird]

1. Why wouldn't it result in a waiver since the spouse is waiving all rights to a distribution of benefits due the employee on the date the waiver is executed?

Like I said, it depends on exactly what the waiver said. It might be ok.

2. Where do you see the IRA being paid to the estate of the employee?

I don't. My point was that the employee elected a lump sum; I can sort of see paying it to the estate, but where does the plan get off adding the "FBO her IRA"?