Beneficiary Designation Forms

[CLE401kGuy]

Have a client that would like to have their participants self-serve benefits - i.e. they will log onto a terminal to complete all benefits items including 401k - they can enter beneficiary info - but a hard copy form has always been required... hard copy forms, still required? What are others doing in this area... Thanks

[QDROphile]

What are you doing about spouse consent?

[GMK]

You could gather the information on-line, but I'd recommend printing the form (whenever new information is entered) and having the participant sign and date it.

Years from now, I'd prefer be able to show the court a signed and dated document rather than trying to explain how I know that there is no question that the information some unknown person entered on-line does in fact reflect the wishes of the participant. But maybe that's just me.

[Peter Gulia]

How about the following as another possibility?

The plan's administrator accepts a computer-entered beneficiary designation only if it provides 100% of the death benefit to the participant's spouse OR the system confirms that the participant does not have a spouse.

If a participant has a spouse and wants to name a beneficiary other than his or her spouse, the administrator requires the participant to put ink on paper and do so in the presence of a notary.

GMK is right to remind us that explaining to a court how a system works involves some expense. But in some circumstances, a prudent plan administrator might find that efficiencies from computer-system beneficiary designations outweigh the risk and expense. And at least one Federal appeals court has recognized that acts done using the participant's identifying information and password bind the participant.

Foster_v_PPG_Industries.pdf

[david rigby]

... OR the system confirms that the participant does not have a spouse.

No criticism of Peter, but just an opinion:

Any process/system should consider the unmarried participant who later gets married. In many cases, the use of a computer-based system may encourage some particiapnts to assume "updates will be automatic", so that participant will not provide any notification to anyone when the marital status changes.

[Peter Gulia]

Yes, I do suggest that a system:

warn a participant that a beneficiary designation, even if it does not currently require a spouse's consent, won't be effective if later there is a spouse.

remind a participant - when the data sees the presence of a spouse - that a beneficiary designation not consented-to by the current spouse is ineffective.

Along with these and other warnings, I envision a system that gets data feeds from the employer's health plan and all other employee-benefit plans and employment-related records. (If not data feeds, the employer that serves as the retirement plan's administrator should update the data frequently and regularly.)

[GMK]

explaining to a court how a system works involves some expense.

It's not about the money. It's about the fiduciary responsibility of the plan administrator to operate the plan according to the plan doc and the law, including not giving a participant's benefits to persons "identified" as beneficiaries by someone other than the participant and without the consent of the participant.

The web site data entry with notices and warnings can work just fine for the good guys and gals, but how does the plan administrator know that someone didn't steal the login information and make the beneficiary designations contrary to the wishes of the participant. Just assuming that whoever had the login information has the authority to designate beneficiaries doesn't cut it for me.

Paperless data acquisition and filing are great, but in this case it is administratively easier (for me, at least) to simply get the signed and dated paper form from the participant than it would be to set up a data cross referencing system sufficient to guarantee that all the bad guys are always foiled.

[masteff]

but how does the plan administrator know that someone didn't steal the login information and make the beneficiary designations contrary to the wishes of the participant. Just assuming that whoever had the login information has the authority to designate beneficiaries doesn't cut it for me.

If you have adequate security measures but still entertain as a real probability that your users are being compromised, then your website needs to be for review/information only and all actions must be done in person because you'll never be able to satisfy yourself that the person on the other end of the computer is not an imposter.