Death of alternative payee before designating beneficiary

[Guest Eva14]

My husband was the alternate payee as a result of a QDRO from his first marriage, the divorce was finalized in 1985, and at that time he assigned his sister as his beneficiary, long before we met and married.

We married in 2002, and although he contacted the retirement center of the QDRO with the intention to modify his beneficiary election, he was told that it couldn't be done until he started receiving benefits.

He was supposed to start receiving benefits in Dec 2014, and requested the documents to start the process to receive payments, but he died last month (sept), the documents arrived 2 days after his death, he didn't get a chance to sign them and assign me as his beneficiary.

Where do I stand now? Do I, as his wife for the last 12 years have any chance of receiving the benefit despite the fact that he didn't get to assign me in writing?

Please help.

[ETA Consulting LLC]

I'm assuming it was a defined benefit plan. In the plan, I believe he was entitled to a stream of payments that would've otherwise been paid to his first spouse. In the event of his untimely death, those benefits should be paid to his estate.

Now, if this were a Defined Contribution plan, then the answer would be easy. The account balance that was separated for his benefit would by payable to his estate upon his death.

From your fact pattern, it sounds as if he was otherwise entitled to a stream of payments that would not end until the stream ends; which would be when his first spouse passes away.

The easiest approach would be to pose this question to the Plan Administrator:

Ask them how was the entitlement calculated or determined. Is it an offset from a stream of payments being paid to his first spouse? If so, then when would this payment end? If it were to end at his death, then there should be a balance available as he did not actually start his annuity payments. No way to know without details from the plan administrator.

Hope this helps; but a Defined Benefit expert may be more equipped to address the alternatives for DB plans.

Good Luck!

[Guest Eva14]

Thank you for your prompt response.

Yes it was a Defined Benefit plan and was set up as Separate Interest. My husband could commence receiving his portion when the ex reached her minimum retirement age, which would be Dec 2014.

There is a balance, and as I read through the documents, it says that if less than three years of benefits have been paid out, his beneficiary will receive the remainder of the contribution and interests in the event of his death.

My worry is that he didn't get a chance to assign me as his beneficiary, and in the original QDRO (1985), he had assigned his sister. Will that pose a problem for me to claim this benefits?

Thank you.

[ESOP Guy]

I would start by talking to the plan administrators.

They know the plan and its rules.

They should be able to get you the answers and guide you through the process.

As a general rules spouses have rights (that is how your husband got the QDRO benefit in the first place) but like all general rules there can be exceptions.

So start with the plan administrator.

Sorry for your loss.

[My 2 cents]

My condolences.

I agree that the first place to start is to contact the plan administrator. The provisions of the QDRO and the plan would govern, and I have seen great variations between QDROs.

While, as ESOP Guy indicates, as a general rule spouses have rights under defined benefit plans, the same is not generally true for spouses of spouses. It is my understanding that, in general, no protections are required by law for the spouse of an alternate payee under a defined benefit plan, and the marriage of the alternate payee would not automatically override prior beneficiary designations (the way it would if a participant were to designate a beneficiary and then marry).

I have seen separate property QDROs that restored the alternate payee's benefit to the participant in the event the alternate payee died before commencement of benefits. The provisions of the QDRO (if any - many QDROs do not say what to do in many possible contingencies) concerning what to do in the event of the death of the Alternate Payee would govern. So you will need to go to the plan administrator to find out what rights, if any, you may have.

[david rigby]

Agree with response from My2Cents.

Even if the sister is the beneficiary, there may be a "disclaimer" that she could execute in your favor. (I'm not an attorney, so this is not legal advice.)

[CADMT]

It depends on the plan provisions regarding death benefits and whether the separate interest had any form of guaranteed (certain) payments and/or death benefit. Absent any of the foregoing benefits, under a separate interest, the AP benefit ceases when the AP dies. Also under separate interest there is typically no provision for the restoration of the Participant's original benefit once it has been separated. Unless you have documentation that confirms the AP's intention to name you beneficiary, the plan has no means to modify any previously named beneficiary.

I would consult with an attorney, but you should also determine just what, if any, survivor or death benefits, is at issue. In some cases, the cost of any action to gain the benefit, may not be worth the amount of benefit gained.

[My 2 cents]

It depends on the plan provisions regarding death benefits and whether the separate interest had any form of guaranteed (certain) payments and/or death benefit. Absent any of the foregoing benefits, under a separate interest, the AP benefit ceases when the AP dies. Also under separate interest there is typically no provision for the restoration of the Participant's original benefit once it has been separated. Unless you have documentation that confirms the AP's intention to name you beneficiary, the plan has no means to modify any previously named beneficiary.

I would consult with an attorney, but you should also determine just what, if any, survivor or death benefits, is at issue. In some cases, the cost of any action to gain the benefit, may not be worth the amount of benefit gained.

Even so, the plan itself would be most unlikely to offer any protection to the spouse of an alternate payee, beyond possibly making the alternate payee's spouse the first level for default beneficiary if the QDRO would pay a benefit on account of the death of the alternate payee and no valid beneficiary designation was made. In this case, if there was a valid designation of the alternate payee's sister, subsequent marriage of the alternate payee would not result in the prior designation becoming invalid. If the QDRO would pay any sort of death benefit on account of the death of the alternate payee, if the designated beneficiary (AP's sister) is alive at the time of the alternate payee's death, it is almost certain that that person would be paid in preference to the alternate payee's surviving spouse.

[K2retire]

It seems odd to me that the beneficiary designation could not be changed until benefits commence. This situation is exactly why that sort of provision should not be in place.

[Effen]

The beneficiary designation isn't really relevant. Most likely there is no benefit payable to anyone as a result of the AP's death. The APs only benefit is a portion of the Ps benefit. The benefit is only payable to the AP.

The QDRO can only assign benefits the plan would have paid anyway. Other than the run out on a period certain, there is no event that would result in a secondary beneficiary receiving benefits.

DB plans are not wealth accumulation plans - they are retirement plans. If the retiree is no longer alive, the benefit stops.