Control Freak Spouse?

[Pammie57]

I had a participant ask me if she could add/get a Power of Attorney for her husband to call about her 401(k) account. Is that a possibility? I know he is encouraging her to take a loan of 50% of her vested balance. I know he encouraged her to stop contributing at all...

I have never had a participant ask me that before. Thoughts?

[Peter Gulia]

Some service providers allow a person other than the participant to participate in a telephone conversation if the participant, once sufficiently identified, says he or she grants permission for the other person to participate in the conversation and the participant remains on the telephone call.

[david rigby]

He may not be a control freak. He may be unemployed, and lazy. (I've seen it.)

But to your question, the plan/employer does not make decisions about a POA. Isn't that a matter for the court? No in this case, it's not, because the question really isn't about POA; it's really about the husband asking for rights to control the account (directly). Seems unlikely the plan permits that.

(As my momma told me, don't look for ways to help fools make fools of themselves.)

[MoJo]

I don't think this is an "ERISA" matter - it's one of state law. A POA grants the holder the right AND power to act on behalf of the grantor of the power (to the extent of the language in the POA). If it is a VALID POA - then the person who hold it, FOR ALL PURPOSES ALLOWED IN THE POA AND UNDER STATE LAW -- *IS* THE SAME PERSON AS THE ONE WHO GRANTED IT.

The questions to ask are 1) is it a "valid" POA?; 2) Does the POA grant authority to manage the 401(k) assets (either specifically, or as part of a "general" grant; 3) Is there anything in "sate law" that limits the grant of authority (doubtful, but I haven't research all 50 "quirky" states); and finally 4) Is there anything in ERISA that preempts state laws on POAs with respect to a plan (not that I know of, and virtually all of the service providers I've worked for had "POAs" for some participants - usually a financial advisor).

[Peter Gulia]

Without remarking on the circumstances Pammie57 describes, . . . .

If ERISA governs an employee-benefit plan, ERISA preempts State law. A plan or its administrator may set standards about whether to recognize a power of attorney. A plan’s sponsor or administrator may set those standards without following any State’s law. A plan’s administrator may recognize a power even if it is invalid under State law. A plan’s administrator may decline to recognize a power despite the power’s validity under all States’ laws.

In reviewing an administrator’s decision, courts may apply the Federal common law of ERISA, even if doing so leads to a different outcome than evaluating a power under State law.

For an ERISA-governed employee-benefit plan that grants discretion to the plan’s administrator (as almost all do more than a quarter-century after Firestone Tire & Rubber Co. v. Bruch), a court defers to the administrator’s reasoned decision about whether to recognize an agent who seeks to act under a power of attorney.

See, for example, United Refining Company Incentive Savings Plan for Hourly Employees v. Morrison, No. 1:12-cv-238 (W.D. Pa. Nov. 22, 2013); Pension Committee Heileman-Baltimore Local 1010 IBT Pension Plan v. Bullinger, No. 1:92 Civ. 00204, 16 Employee Benefits Cas. (BNA) 1024, 1992 U.S. Dist. LEXIS 17325, 1992 WL 333653 (D. Md. Oct. 29, 1992); Clouse v. Philadelphia, Bethlehem & New England Railroad Co., 787 F. Supp. 93 (E.D. Pa. 1992).

If the participant asked a question of the plan’s administrator, the administrator’s fiduciary responsibilities, including the duty of communication, might require it to respond.

If the plan document doesn’t state provisions for which powers are recognized or refused, and the plan’s administrator hasn’t yet adopted procedures, now might be a time to develop procedures.

[MoJo]

If ERISA governs an employee-benefit plan, ERISA preempts State law. A plan or its administrator may set standards about whether to recognize a power of attorney. A plan’s sponsor or administrator may set those standards without following any State’s law. A plan’s administrator may recognize a power even if it is invalid under State law. A plan’s administrator may decline to recognize a power despite the power’s validity under all States’ laws.

I think you totally misconstrue ERISA's preemption of state laws. ERISA ONLY preempts state law to the extent that ERISA is inconsistent with those state laws. Where does ERISA govern who can and cannot operate on behalf of an individual? A POA, just like a guardianship, grants the holder of the power the right AND power to operate as the individual/participant would (subject only to the terms of the POA, guardianship, and state law).

Absent something INCONSISTENT in ERISA that addresses the issue, preemption does not exist - and state law would govern the exercise of the POA (or guardianship, or even a deceased's estate - or whatever).

[My 2 cents]

Shouldn't someone suggest that the participant seek shelter from a potentially dangerous and abusive spouse?

In no jurisdiction does the spouse have the authority to control whether or not a plan participant makes ongoing contributions to a 401(k) plan, let alone attempt to compel the participant to agree to a power of attorney giving the spouse any control over the participant's account. There is no indication in the opening post to indicate that the participant has any reason to want there to be a power of attorney. Sounds to me as though some sort of restraining order is needed.

[Peter Gulia]

In each of the three decisions I cited as examples, the court analyzed the effect of a power of attorney under the Federal common law of ERISA.

In Clouse (the oldest of those cases), Judge Dalzell found that, if the plan grants discretion, a court reviews the plan administrator's decision not as a fresh look but rather under a deferential abuse-of-discretion standard. Because the plan did not grant discretion, Judge Dalzell independently reviewed the effect of the power of attorney. The opinion does so under Federal common law. The opinion's citations include Federal courts' decisions and a national treatise, but nothing State-specific.

In the 2013 decision, Judge Fischer observed: "Requiring the Plan Administrator to engage in such an exercise [evaluating the validity and meaning of a power of attorney] would run contrary to ERISA's stated policy of ensuring that plans are subject to a uniform system of law." Slip opinion at page 8.

[Bird]

The OP asked if it was ok for the spouse to call about the account. I'll usually just ask the participant to shoot me an e-mail saying it is ok.

If some "action" is going to result, then the participant can give the spouse the username and PW, if that is sufficient, or the participant can sign whatever forms are needed to complete the action. A PoA is a silly and convoluted way to get there, IMO. If the participant is being pressured or otherwise things are inappropriate, I don't see how a PoA protects the participant or the service provider.

[K2retire]

The most common situation I've seen for a POA is a participant who is being deployed for military duty. In that situation, no one has ever questioned its validity. Why would this be any different, legally? (Morally it feels different, but I don't think that's a good reason for a fiduciary to act.)

[Peter Gulia]

I agree with Bird's observations. As I said in my first post, some service providers allow a person other than the participant to participate in a telephone conversation if the participant, once sufficiently identified, says he or she grants permission for the other person to participate in the conversation and the participant remains on the telephone call. A recording of the telephone conversation is good. An e-mail that will be preserved is another way to get and keep evidence of the permission.

One reason there hasn't been much attention to retirement plans' standards for recognizing a power of attorney is that many people practically accomplish the agency, at least for investment directions and often for some transactions, by sharing a username, password, and other identifying information.

At least the validity of a military power of attorney often is evaluated generously because such a document is notarized by a military official, and under Federal law the document is exempt from any State-law requirement of form, substance, formality, or recording.