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Unclear Beneficiary Designation


Zorro1k

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I have a non-ERISA DB plan with a participant that completed a beneficiary designation prior to passing away. His designation identifies multiple beneficiaries all at 100%. One of those beneficiaries has submitted a claim form stating that he believes he is entitled to a 100% benefit. What guidance is there on beneficiary designation for a non-ERISA plan when the designated beneficiary is unclear? Any additional thoughts would be appreciated.

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I have a non-ERISA DB plan with a participant that completed a beneficiary designation prior to passing away. His designation identifies multiple beneficiaries all at 100%. One of those beneficiaries has submitted a claim form stating that he believes he is entitled to a 100% benefit. What guidance is there on beneficiary designation for a non-ERISA plan when the designated beneficiary is unclear? Any additional thoughts would be appreciated.

As in: To my friend Tom - 100%, to my friend Dick - 100%, to my friend Harry - 100%? With no contingency being implied?

Four possible solutions:

1. Interpret the designation in a way that adds up to 100%. Give Tom, Dick and Harry each 33 1/3%

2. Determine that the beneficiary designation was not valid since it purported to give more than 100% of the benefit to the beneficiaries. Fall back on the plan's default beneficiary provisions.

3. Obtain an agreement from all those designated on the beneficiary form concerning the allocation of what is available as a plan death benefit.

4. Throw up your hands and file an interpleader.

Unless you don't mind paying out the benefits multiple times, if the beneficiary form does not present a clean way to pay it out once, you cannot respect the demand for 100%. If you do, then the others will each file a claim for 100%, and how could you defend the decision to pay it all to Tom?

Always check with your actuary first!

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Perhaps some time-consuming research will yield an answer, but I would dispense with that. If the facts are as you say, i.e., each beneficiary has 100% inserted next to his name, and there is no other beneficiary with less than 100%, or nothing, next to his name, AND if you have found no subsequent beneficiary designation superseding the one you describe, I would get the beneficiaries together and propose to them that if they agree, in writing, to an even-Steven split within a reasonable amount of time, you will honor that, but if they don't you will consider your legal options. These legal options would include treating the designation as invalid and resorting to the Plan's default rules, or interpleader, but you don't have to make any commitment as to what option you will choose while you are negotiating with the named beneficiaries. P.s., I would not consider something other than an even-Steven split, even if they all agree that one should receive more than the others.

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I see it as a beneficiary designation that identifies the beneficiaries and gives them equal shares. (I'd check with a lawyer to find out what state law says about it.)

If you want a second opinion, you are justified in firing the person who accepted this beneficiary designation form on behalf of the plan.

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Thanks for the responses. It is a church plan. I've been wondering if the unclear form (which was a change in beneficiary) is enough to make the form invalid and make the previous form the one that should govern. Based on what I can tell from the form and the will that was provided (though I'm not sure why) equal shares is the intent of the participant. Seems like the courts have applied a substantial compliance test to incomplete forms when determining if they are valid. I'm wondering if the same test and rationale applies when a form is unclear.

For my money, I agree that getting agreement on an equal share distribution is the best way to go. If they don't agree, deny all claims (so far one of four beneficiaries has made a claim for 100%) and let them go through the appeals process as outlined in the plan.

Really appreciate the thoughtful discussion.

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