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Beneficiary - divorce and death


Lou81

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I have a participant that recently went through a divorce and the QDRO was processed, paying the former spouse.

The participant passed away last week.   He was provided but never returned his new beneficiary form.  The form on file is the old one listing the now former 'spouse'.

Does the divorce and QDRO deem the designation form null and void?

I appreciate any input.

Thanks!

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35 minutes ago, Lou81 said:

Does the divorce and QDRO deem the designation form null and void?

Does the form and/or the Plan include a statement about divorce automatically changing/invalidating a beneficiary election?

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.

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Exactly - it's not an automatic. Most pre-approved plans now have that as either automatic or as an option that can be checked, but as always, you have to see what the plan document says. If the beneficiary form has related language, the document should support because it is the document that provides ultimate determination.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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3 minutes ago, CuseFan said:

Exactly - it's not an automatic. Most pre-approved plans now have that as either automatic or as an option that can be checked, but as always, you have to see what the plan document says. If the beneficiary form has related language, the document should support because it is the document that provides ultimate determination.

Yes, this is where you want to look.   Almost all my documents have a provision that says this or it is a choice that could have been made in a pre-approved plan.   This is a document review question not law question.  

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1 hour ago, ESOP Guy said:

You might want to ask McKay Hockman.  

McKay Hochman no longer exists.  https://benefitslink.com/cgi-bin/pr/index.cgi?rm=press_release;id=50737

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.

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I was an expert in a case where this issue was involved. Fully agree with above that the plan probably should contain an automatic revocation for divorce, but if it doesn't it gets complicated. Supreme Court cases (e.g., Egelhoff) many years ago seemed to elevate plan language (because of ERISA preemption combined with ERISA statute's inattention to the issue), so if plan language literally said that the person whose name is written on the form gets it, that person would get it. Textualism, sort of. Later cases in lower federal courts seem to limit this to say that, well, the plan administrator may be OK in terms of its duty in following the beneficiary designation (again assuming no plan language or admin procedure otherwise) and paying to the former spouse, but maybe then the person(s) who would otherwise be the beneficiaries if not for the (seemingly unintentionally uncorrected) beneficiary designation can then ask court for a constructive trust and they and the former spouse can fight it out in court. Plan administrator might want to interplead.

Also, the terms of the QDRO and marital dissolution must be reviewed carefully, because there may be the equivalent of a quitclaim by the QDRO recipient to any other benefit, which lower courts have enforced.

What a lawyer gets paid for putting a sentence into the plan document that says that a beneficiary designation naming the participant's spouse is revoked by death, $10.

What a lawyer gets paid representing a party in a contest where the sentence was not included in the plan, $10,000. At least. And each side has a lawyer.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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We work with a TPA who used McKay Hochman for EGTRRA and PPA.  The provision you are looking for was in an amendment to the Basic Plan Document, specifically First Amendment to the McKay Hochman Co., Inc. Prototype Defined Contribution Plan Basic Plan Document #03.  It states:

“If a Participant completes or has completed a Beneficiary designation in which the Participant designates his or her Spouse as the Beneficiary and the Participant and the Participant’s Spouse are legally divorced subsequent to the date of such designation, the designation of such Spouse as a Beneficiary hereunder will be deemed null and void unless the Participant, subsequent to the legal divorce, reaffirms the designation by completing a new Beneficiary designation form.”

I realize you may be working with a different BPD, but hopefully this will help you find the provision in your particular document.

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