Fiduciary duty in regards to beneficiary designations

[oriecat]

What are the fiduciary duties of an employer/plan sponsor in regards to beneficiary designations? In terms of keeping track of them, making sure they are completed, etc. Maybe fiduciary isn't even the right term, but how much effort do we need to put into them to best look out for the plan and its participants?

Thank you.

[J Simmons]

I think you have a duty to keep all that you receive by way of designations of (or attempts at designating) death beneficiaries in the plan files, and keep them organized and safe.

I think you start down a treacherous path towards liability someday if you review what is so turned in, before the employee dies, and give the employee feedback. For example, if you notice two deficiencies in an attempted designation and notify the employee, who corrects them, turns the designation back in and dies before you then notice a third deficiency, what then? Two different beneficiaries might stand to gain on whether you gloss over the third deficiency or you act in accordance with the third deficiency and perhaps reject that designation entirely. Either way, your decision post-death of the employee will anger one or the other 'death beneficiaries'. You might have a finger of blame pointed at you, 'why didn't you notice the third deficiency and give the employee the opportunity to correct it as well, before he died?'

[Jim Chad]

I am going to weigh in with my opinion, as a TPA, FWIW. I never look at them (for mercenary reasons). I will never be paid enough to deal with them. Very few are filled out perfectly and I could easily spend hours every day advising people on this..... and go broke in a month.

In fact I tell clients to keep them in that person's personnel file forever. That way when someone dies, they have one file to go through carefully to find the latest form. I have no good way to know where the latest form is so please don't send a copy to me.

Hope this helps

[oriecat]

I think you have a duty to keep all that you receive

Would you say that we have a duty to make sure we receive one? I think our biggest problem is people enrolling and then just never doing the form.

We now have a means of electronic designation through our Self-Service website. Would that generally be deemed acceptable if people adding them in there?

[J Simmons]

Would you say that we have a duty to make sure we receive one? I think our biggest problem is people enrolling and then just never doing the form.

No. That's why your plan has (I assume) default death beneficiary provisions.

We now have a means of electronic designation through our Self-Service website. Would that generally be deemed acceptable if people adding them in there?

I don't think I'd rely on that. How do you prove, if contested after death, that it was truly the deceased EE that made the electronic death beneficiary designation?

However, if that is the procedure indicated in the plan documents or a written policy, and measures are taken to make sure it was the EE and not anyone else that made the election, the fact that it is electronic should suffice. See Kennedy v Plan Administrator of DuPont, 1/26/2009 decision by the U.S. Supreme Court.

[masteff]

an employer/plan sponsor

I'd argue that an employer/plan sponsor has a higher level of duty than TPAs.

At my former job (4 DB & 4 DC plans w/ roughly 6500 combined participants), we always relied on our plans verbage about "properly completed on the proscribed form". We then had a basic checklist that our file clerk used to review each form for a minimum level of completeness. Basically it boiled down to proper spousal consent, sufficient info on the beneficiaries, and the minimum info from a trust if such was designated.

[WDIK]

No. That's why your plan has (I assume) default death beneficiary provisions.

This statement by J Simmons reflects my initial reaction.

[oriecat]

Thanks all. I will review the plan doc to see how it words that, just to be safe.