Death benefit to Niece or Spouse?

[Lori H]

a participant in a 403(b) recently passed away. The Designation of Beneficiary form on file from 1997 states the deceased participants niece will be his beneficiary. Last year the participant married. He never filled out a new DOB form. However, the death benefit will go to his new spouse, correct?

The plan document states that "if a married participant dies prior to his annuity starting date, the administrator will direct the vendor to distribute a portion of the participants vested account balance to the surviving spouse in the form of a Qualified preretirement survivor annuity (QPSA), unless the participant has a valid waiver election in effect OR unless the participant and his spouse were not married throughout the one year period ending on the date of the participants death" So if they were not married for one year, would the niece be the beneficiary?

The plan sponsor has confirmed the participant was NOT married for one year at the time of his death

[Craig Garner]

On the surface, it sounds like the niece would be the Beneficiary, per the plan document. I would also be curious what the annuity/custodial contract says, and is it the same or different from the plan document (a conversation with the vendors legal team may be in order).

Given that you have a 1997 beneficiary form, there may be a substantial account balance involved. Sometimes, a plan just needs to get a qualified attorney involved, especially if there is a conflict between the annuity contract and the plan document.

Before paying any benefits, I would want to know if there are any potential issues with EITHER the niece or spouce. For example, the plan may want to mail out letters to each, explaning the beneficiary designation it has on file, the one-year marriage rule, the amount of the account balance, and a "preliminary determination" by the plan sponsor as to who it believes the correct beneficiary is. The letter should ask if ANY of the facts are in dispute (maybe the spouse has a beneficiary form that the plan administrator does not), and request that each party sign off before benefits are paid. If they both sign off, then go ahead and pay out. BUT, if one of them comes back with issures/concerns or threat of a lawsuit, then you know you are going to need HELP!!

Craig Garner