Beneficiary refuses to pension benefit

[Guest Benefitsrock]

A spouse beneficiary refuses to accept his deceased spouse's benefit under a pension plan. Can we simply send him distribution forms by certified mail and note in the participant's file that the spouse refused the benefits? Do we continue to accure benefits and pay her PBGC premium? Unusual sitution in this day and age...

[Kevin C]

You might find some useful information in GCM 39858.

[Guest Benefitsrock]

You might find some useful information in GCM 39858.

Thanks so much!!!!

[mbozek]

You might find some useful information in GCM 39858.

How is this information useful- it is about electing to disclaim benefits? Disclaiming benefits under IRC 2518 is very tricky and offering this as an option could create a liability issue for the plan if the disclaimer is done incorrectly which will result in the spouse being taxed (assuming that the spouse would even consider it). Also why do you even think it would be possible? All DB plans I have ever seen only provide a survivor benefit to a surving spouse. Under the IRS rules for disclaimers the surving spouse is deemed to have predeceased the employee and the benefits must be paid the next surviving beneficiary. Since a DB plan does not provide for any contingent beneficary in the event of the spouse's death the surving spouse's benefit would most likely be forfeited. I have never heard of a disclaimer where the benefits were not paid to a successor beneficiary.

If the plan permits, the death benefit can be sent to surviving spouse since there is no requirement under IRS regs that the spouse's consent be obtained before paying the benefit out. For tax purposes the surviving spouse will be deemed to have received the benefits, even if the check is not cashed.

[Kevin C]

My, my, someone is cranky. If you don't think a discussion about whether a disclaimer of benefits constitutes prohibited assignment or alienation that includes cites might be useful, perhaps you can provide some useful information for the OP.

ANY incorrect action or inaction regarding a qualified plan can create a liability issue.

There are DB plans that provide pre-retirement death benefits even if the surviving spouse is not the beneficiary.

If they pay the benefit despite the surviving spouse's objection, what are they going to do when the uncashed checks become stale, are voided and the amounts are credited back to the plan account?

[mbozek]

My, my, someone is cranky. If you don't think a discussion about whether a disclaimer of benefits constitutes prohibited assignment or alienation that includes cites might be useful, perhaps you can provide some useful information for the OP.

ANY incorrect action or inaction regarding a qualified plan can create a liability issue.

There are DB plans that provide pre-retirement death benefits even if the surviving spouse is not the beneficiary.

If they pay the benefit despite the surviving spouse's objection, what are they going to do when the uncashed checks become stale, are voided and the amounts are credited back to the plan account?

I questioned the relevance of citing to a GCM on disclaimers as an alternative to paying benefits to a suviving spouse because of the high risk to the plan of not complying with the complex tax law provisions for disclaimers which will require the assistance of counsel when as I indicated in my previous post the simple non risky solution is to just pay the benefits to the spouse without asking for consent. assuming of course that the plan pays benefits to non spouses who have been designated under the plan. There are very few DB plans that will incur the unnecessary cost of paying benefits to non spouses as well as the gift tax consequences of such transfers.

Under the IRC the benefits are taxed to the spouse when they are mailed regardless of whether the checks are cashed. Sooner or later the spouse will start cashing the checks to offset the tax liability on the 1099.

Under PBGC reg 4006.6(b)(1)(iii) an individual ceases to be a participant for premium purposes at death.

[Kevin C]

Under PBGC reg 4006.6(b)(1)(iii) an individual ceases to be a participant for premium purposes at death.

The PBGC's Comprehensive Premium Payment Instructions says "[h]owever, a deceased participant will continue to be counted as a participant if there are one or more beneficiaries or alternate payees who are receiving or have a right to receive benefits earned by the participant." It's at the top of page 12 of the booklet (page 14 of the .pdf).

http://www.pbgc.gov/docs/2009_comprehensiv...let.pdf#page=13

[mbozek]

Under PBGC reg 4006.6(b)(1)(iii) an individual ceases to be a participant for premium purposes at death.

The PBGC's Comprehensive Premium Payment Instructions says "[h]owever, a deceased participant will continue to be counted as a participant if there are one or more beneficiaries or alternate payees who are receiving or have a right to receive benefits earned by the participant." It's at the top of page 12 of the booklet (page 14 of the .pdf).

http://www.pbgc.gov/docs/2009_comprehensiv...let.pdf#page=13

well that answers the Q that PBGC premiums have to be paid as long as benefits are due from the plan.

[Guest Benefitsrock]

Under PBGC reg 4006.6(b)(1)(iii) an individual ceases to be a participant for premium purposes at death.

The PBGC's Comprehensive Premium Payment Instructions says "[h]owever, a deceased participant will continue to be counted as a participant if there are one or more beneficiaries or alternate payees who are receiving or have a right to receive benefits earned by the participant." It's at the top of page 12 of the booklet (page 14 of the .pdf).

http://www.pbgc.gov/docs/2009_comprehensiv...let.pdf#page=13

well that answers the Q that PBGC premiums have to be paid as long as benefits are due from the plan.

While not directly on point, I think it's helfpul to consider how a spouse can formally disclaim a benefit for purposes of the anti-alienantion and assignment of benefit and assignment of income rules. I am concerned about sending the spouse a check (who has been very adamant that he does not want it), him not cashing it, and then him having to pay taxes on the amount. Aside from sending the spouse a check, formally disclaiming the benefit may be best thing to do.

[mbozek]

Under PBGC reg 4006.6(b)(1)(iii) an individual ceases to be a participant for premium purposes at death.

The PBGC's Comprehensive Premium Payment Instructions says "[h]owever, a deceased participant will continue to be counted as a participant if there are one or more beneficiaries or alternate payees who are receiving or have a right to receive benefits earned by the participant." It's at the top of page 12 of the booklet (page 14 of the .pdf).

http://www.pbgc.gov/docs/2009_comprehensiv...let.pdf#page=13

well that answers the Q that PBGC premiums have to be paid as long as benefits are due from the plan.

While not directly on point, I think it's helfpul to consider how a spouse can formally disclaim a benefit for purposes of the anti-alienantion and assignment of benefit and assignment of income rules. I am concerned about sending the spouse a check (who has been very adamant that he does not want it), him not cashing it, and then him having to pay taxes on the amount. Aside from sending the spouse a check, formally disclaiming the benefit may be best thing to do.

Under the terms of your plan who is designated as the successor beneficiary if the spouse dies? Under the disclaimer provision of IRC 2518 the disclaimant cannot designate who will receive the funds.

Of course, you are assuming that the spouse will cooperate and agree to pay for the cost of hiring counsel to properly prepare the disclaimer for the benefits he is disclaiming and will not pay for the legal fees out the funds he is disclaiming.

Why are you concerned about sending a check to someone who is legally entitled to the money? What does taxes have to do with it?

Q what do you say to a retiree who has reached age 70 1/2 refuses to commence MRDs?