Secondary Beneficiary

[Guest beppie_stark]

A plan participant died after filing a beneficiary designation naming her husband as her primary beneficiary and her son as her secondary beneficiary. The husband never claimed benefits from the plan or completed his own beneficiary form. Now the husband has also died.

The son is requesting payment as his mother's secondary beneficiary. Should the benefit be paid to the primary beneficiary's estate or to the original participant's secondary beneficiary?

Our plan provides that an unmarried "Participant's" default beneficiary is his estate but should this apply to a Beneficiary as well?

[jpod]

If this is an ERISA plan, it must be the estate of the spouse. If this is not an ERISA plan, what do the plan document and beneficiary designation say that might suggest that it should be paid to someone or something other than the estate of the spouse?

[Bird]

If this is an ERISA plan, it must be the estate of the spouse.

Interesting, wasn't there a recent thread that spoke of a plan provision that said the primary beneficiary had to survive the participant by so many days? Maybe it was a one-man plan and therefore not an ERISA plan, but I doubt that [purported] language would be in a Vanguard prototype if it weren't allowed in an ERISA plan.

As always, you want to read the document, but I have to admit, mine aren't clear on this.

[jpod]

Bird: I take that back. I should not have said "a plan subject to ERISA." I meant to say a plan subject to the J&S requirements, which would include one-person plans not subject to Title I. With that said, I have always understood the J&S requirement that the surviving spouse be the sole beneficiary (unless he/she consented otherwise), to preclude attaching any type of strings; in other words, if the spouse survives, end of story. You could not have a condition that requires, for example, that the spouse survive by X number of days, or that the spouse be alive to accept the payments. Therefore, the estate of the spouse would step into the spouse's shoes as the rightful and required beneficiary. Has the IRS said otherwise?

[masteff]

Interesting, wasn't there a recent thread that spoke of a plan provision that said the primary beneficiary had to survive the participant by so many days?

I'd had to look back at that myself. The plan in that thread had a survivor contingency clause that the spouse had to live at least 150 days past the participant. This falls w/in the provision of the 401(a)(9) regs that allow the designated beneficiary to be determined as late as Sept of the year following death. http://benefitslink.com/boards/index.php?s...c=43782&hl=

A key question to me would be whether the account had been transferred or redesignated to the spouse (or if the plan provisions provided that it should have been done already even if it hadn't). Then you'd look at whether the spouse died before Sept of the year following the employee's death. If not, then for me, it's open and shut that it's spouse's estate.

[Bird]

Masteff, wait a sec, the Sept 30 of the following year rule is to determine the beneficiary for RMD purposes, and while it implies that changes from the original beneficiary could happen for various reasons, it doesn't say that a plan could or couldn't have an indefinite contingency clause for actual distribution purposes.

jpod, I'm not so sure that a J&S plan couldn't have a contingency clause; in fact I don't think whether the plan is J&S matters. The REA rules were put in place to protect the spouse, not the spouse's estate.

I don't really know the answer...

[jpod]

Bird: Per the 401(a)(11) exception for DC plans not subject to minimum funding rules, absent spousal consent the entire benefit must be payable in full, upon the death of the participant, to the surviving spouse. It never occurred to me that it would be acceptable, under this exception, to have any strings attached to the spouse's rights. Certainly, requiring the spouse to survive by X number of days would be such a string. Also, forcing the spouse to take every last nickel before he/she died because he/she would not be able to effect a plan of distribution per her last will and testament would be another such string. While I agree with you that the area is a little grey, absent guidance I have no trouble favoring the interpretation that says everything must go to the surviving spouse's estate.