WCC Posted September 2, 2015 Posted September 2, 2015 Record keeper requires spousal consent for all distributions. However the plan is not subject to J&S, there is no old money subject to J&S and this has been confirmed. Plan document does not require spousal consent, this has been confirmed. The record keeper has agreed that spousal consent is not required but it is "industry standard" to ask for spousal consent. Questions: By requiring spousal consent, isn't the sponsor not following the terms of the plan document by requiring a participant to do something that is not necessary? Would a DOL or IRS auditor take issue with this in a similar manner as any other operational failure (maybe not as severe)? thank you
david rigby Posted September 2, 2015 Posted September 2, 2015 ... not following the terms of the plan document... The reason that ERISA created the requirement to have a written plan document is so that all parties (plan, TPA, participant, etc.) can follow it in uniform manner. There is no "industry standard" that alters the plan provisions. Maybe the sponsor needs a new record-keeper. I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
My 2 cents Posted September 2, 2015 Posted September 2, 2015 This would indeed seem to be a matter of failure to follow the terms of the plan (and a willful one at that). If a participant makes a claim for a lump sum payment or another form of benefit not involving survivor benefits being payable to the participant's spouse and the claim is, in fact, denied, is there not a requirement (if not then, at least at the point where the participant appeals the denial) that the specific plan provision that results in the denial be identified? Does this make the record keeper a plan fiduciary? Last time I looked, "that's how everyone does it" does not carry much weight in litigation, especially when (as here) it is recognized by all that there is nothing in the plan requiring that it be done that way. Always check with your actuary first!
mbozek Posted September 2, 2015 Posted September 2, 2015 Requiring spousal consent in order to receive a distribution from a PS/401plan that has no J & S requirement has become a common practice by record keepers who fear that plans they administer will be subject to claims by disgruntled spouses who claim they did not waive their rights under the plan. Its a useless requirement since spouse has no claim of right to benefits in PS/401k plan that does not pay an annuity as the normal form of benefit. Q Does plan admin require spousal consent for loans? mjb
WCC Posted September 2, 2015 Author Posted September 2, 2015 Q Does plan admin require spousal consent for loans? yes, they do. Only because the recordkeeper says it is "standard" to do so.
mbozek Posted September 2, 2015 Posted September 2, 2015 Record keeper does not understand that spousal consent does not apply if there is no J & S requirement. What does plan sponsor/ admin think of requiring married participants to obtain a spousal consent not required under ERISA? mjb
WCC Posted September 2, 2015 Author Posted September 2, 2015 What does plan sponsor/ admin think of requiring married participants to obtain a spousal consent not required under ERISA? They just think this is the way things should be done since that is the way it has always been done. I have not approached them on this yet, but just wanted to bounce this around here to make sure I don't over look anything. I just find it troubling that participants have to take the time to do something that is not required. Thanks for all the fast responses.
My 2 cents Posted September 2, 2015 Posted September 2, 2015 And what happens if the participant wants to share the proceeds with someone to whom they are not currently married? On what grounds, other than "tradition", could the plan refuse to cooperate? Always check with your actuary first!
Bird Posted September 2, 2015 Posted September 2, 2015 This is so idiotic and annoying - they think they are protecting themselves somehow but they are really exposing themselves for denying benefits for no good reason. I would bet just about anything that if you call their bluff on it they will process a distribution without the spouse's signature. I think I ran into this BS once and did exactly that - refused to even try to get the spouse's signature and basically challenged them to force us, and they caved. It's probably a "thing" for them to ask for it but not really require it. hr for me 1 Ed Snyder
mbozek Posted September 2, 2015 Posted September 2, 2015 Bird: you are sooo right. I have done the same thing and the RK backed down because there is no authority to ask for spousal consent. mjb
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