Default Catastrophe

[Andy the Actuary]

A DB Plan provides that the pension cannot be deferred beyond age 65. Participant Dick Putz is given a timely election package. The Company's records show that Dick is unmarried. A year later a legally married wife from whom Dick has been separated pops out of the woodwork demanding that she had never signed off on his election and that the pension should have been distributed under the automatic J&S form, which was a J&100% survivor annuity. It is determined that the separation is not a legal separation whatever the reasons.

Case I

Dick elected and received lump sum payment.

Case II

Dick did not return his election package and so after attempting to communicate with Dick (via telephone and certified mail which is accepted), the Plan started his pension under the life annuity form believing he was unmarried.

Interested in comments from anyone who has experience with situations like this on how the issue was resolved. Is the response any different if say "n" (n>5) years rather than one year has elapsed?

[Effen]

Did Dick state on his election package that he was not married, or did the PA just assume he wasn't married when the package was prepared? In other words, did dick lie on his election package by stating he wasn't married, or did the package never ask the question?

Seems to me that if he lied on his package then both the plan and his wife could bring suit for forgery and recover the past payments. They should move to collect the entire lump sum if he was improperly paid the lump sum, or the amount of the monthly payments in excess of the J&100. They could probably reduce future payment to recover as well.

It doesn't sound like the plan is in any "trouble", assuming they really had no knowledge of his marriage - did she ever come to the Christmas party?

Obviously, you need to talk to an ERISA attorney.

[Andy the Actuary]

Did Dick state on his election package that he was not married, or did the PA just assume he wasn't married when the package was prepared? In other words, did dick lie on his election package by stating he wasn't married, or did the package never ask the question?

Seems to me that if he lied on his package then both the plan and his wife could bring suit for forgery and recover the past payments. They should move to collect the entire lump sum if he was improperly paid the lump sum, or the amount of the monthly payments in excess of the J&100. They could probably reduce future payment to recover as well.

It doesn't sound like the plan is in any "trouble", assuming they really had no knowledge of his marriage - did she ever come to the Christmas party?

Obviously, you need to talk to an ERISA attorney.

Case A - Election box checked - "I am not married"

Case B - Election box checked - "I am married but cannot locate my spouse"

In either event, have you had direct experience with this situation?

[Effen]

Sorry, no real experience.