What are the beneficiary rules for a Top Hat Plan?

[katieinny]

A participant in a Top Hat Plan died. He was divorced from his first wife, and married to his second wife when he died. He named his children from his first marriage as his beneficiaries, but if the usual QP beneficiary rules apply, his second wife would be the beneficiary. The employer just wants to make sure they pay out the money correctly.

[david rigby]

The rules for any plan are (one hopes) contained in the plan itself.

[QDROphile]

There are no external requirements for nonqualified plans and consequently there are no external default provisions.

[katieinny]

David: That would be lovely, but not the case here.

QDROphile: I'm interpreting your response to mean that the usual beneficiary rule we would apply to an ERISA plan (i.e., spouse) does not apply to a Top Hat plan. The named beneficiary(ies) would be entitled to the benefit, whoever they might be. A spouse does not have automatic rights to the benefit.

[jpod]

As QDRO said there are no laws that could trump what the Plan says. However, the named beneficiary be the beneficiary only if the plan says so. Be careful.

[david rigby]

QDROphile is correct.

If the NQ plan does not have any existing language, it may be prudent to consider if there is any precedent.

At any rate, perhaps the plan sponsor should take this opportunity to amend the plan to incorporate some provisions for beneficiary identification. This might emulate the qualified plan, but is not required to do so.

[J Simmons]

If the second wife will not sign an acknowledgment that in light of the designation of the children from the prior marriage as death beneficiaries is valid and enforceable despite her marriage to the decedent EE at the time of his death, then you might want to consider interpleading the death benefits with a court rather than paying the children from the first marriage only to later face a claim/lawsuit from the second wife that you must pay her the same benefits.

[mbozek]

A participant in a Top Hat Plan died. He was divorced from his first wife, and married to his second wife when he died. He named his children from his first marriage as his beneficiaries, but if the usual QP beneficiary rules apply, his second wife would be the beneficiary. The employer just wants to make sure they pay out the money correctly.

A Top hat plan subject to ERISA is exempt from the J & S rules. In Dickerson v. United Way, 2009 WL 3521283 the Second circuit held that spousal consent was not required before lump sum benefits under a SERP could be paid to the participant spouse merely because of the wife's status as spouse of a participant.

Also it would be difficult to bring a claim of interpleader in federal court because the spouse would have no standing if she were not designated as a beneficiary under the plan and the plan was exempt from the J & S requirement.

The plan should treat the request for benefits from the children as a claim for benefits under ERISA 503 which is one of the few provisions of ERISA that applies to top hat plans and proceed to review the claims of all parties under the claims procedues rules and deny benefits to spouse for the above reasons. The plan administrator would award the benefits to the children and thus create an administrative record which would be difficult for the spouse to overcome in the event she sues.

Of course the plan should have a definitive provision for beneficiary designation and default beneficiaries.