Deceased Participant's beneficiary "may" be under a Conservatorship

[Kansas401k]

Plan participant passed away a few weeks ago. Wife, listed as sole beneficiary, has reached out to find out what do to. We let her know we need a death certificate along with her identification and then we can discuss her options. 

Today, we received a "concerned phone call" stating that the wife was a conservatee with her husband as conservator. The caller also indicated that they are trying to get the conservatorship changed to a living family member.

Absent any court documents to the contrary, I am inclined to treat this like any other death distribution and pay out as the wife wishes. It seems to me that if he had a conservatorship for her, he would also have made arrangements as how to protect her after his death. Does anyone see any liability or issue in proceeding with the distribution assuming that the wife has all documents in order? 

Thanks in advance!

[Lou S.]

I am not a lawyer but I tend to agree. If the beneficiary designation is in order and the Wife submits all the correct paperwork for a death benefit distribution I don't see why the Plan wouldn't pay it.

[ESOP Guy]

Absent evidence of the claim I don't see you can do anything.   I am not a lawyer either but a concerned call isn't facts.  

I will point out most plans do have language discussing if a participant or beneficiary is a minor or incapacitated it seems like.  

So IF you GET the evidence there is a competency issue the document might give you direction on what to do.  

[Peter Gulia]

Even if a plan’s administrator in its discretion finds that a beneficiary is an incapacitated person, many plans’ governing documents grant the administrator permission to pay a conservator or other fiduciary for the incapacitated person, but do not command that means of payment.

However, a careful administrator might prefer a means of payment likelier to show a satisfaction of the plan’s obligation to pay the benefit.

[Luke Bailey]

Kansas401k, if it were me I would follow up and identify the lawyer who is working on establishing the new conservatorship and talk to him/her and then determine what to do. Per your post, the widow hasn't come back to you with the death certificate yet. Until you reach the point where the widow is demanding payment and has fulfilled her requirements, you've got time to see what the "concerned" parties come up with. You don't want to get on the wrong side of a probate court judge and have to explain ERISA preemption to him/her.

[Peter Gulia]

Luke Bailey gives us good practical guidance.

In my experience, too many employers and administrators unwisely reach out to decide or do something before there is a claim to respond to.  (So far, Kansas401k avoided that trap.)  And too many neglect opportunities to channel “concerns” into the plan’s claims procedure.

Following a careful claims procedure gets predictably stronger results.

Luke Bailey suggests one way an administrator might help protect the administrator’s decision-making.  (Showing an estate-planning or family lawyer how to turn her client’s wish into something the plan can deal with often is effective.)

Another way, perhaps depending on the ambiguous facts and circumstances, might be to inform the “concerned” telephoner that anyone can submit a written claim.  (It even could be a claim that recognizes the surviving spouse is the beneficiary, but asserts that she ought not to be the payee and that the plan ought to delay payment for a reasonable time so a conservator can be appointed.)

Following the administrator’s claims procedure, including forming written explanations for each denied claim, makes it much easier to defend the administrator’s decision.  That’s so even for situations in which people are embarrassed, defensive, or hostile.  And it can avoid unnecessary expenses.  Why burden participants’ accounts with an expense for attorneys’ fees to show a court the plan’s primacy if that unpleasant exercise could have been avoided?

My observation is more than anecdotal.  It’s grounded on my experience as counsel to a big recordkeeper (with many thousands of plans and millions of participants), advising a work unit that handled big volumes of death claims.  We used business-process measurements to discover ways to make claims-handling more effective, and to manage our and plans’ expenses.

Sometimes, there is a healthy balance between asserting or defending a plan’s primacy and avoiding unnecessarily deciding a claim in ways that might offend others’ sensibilities.

Also, giving interested persons a way to be heard strengthens the decision-making.  Even unlearned judges can understand the idea of deference to a process.  If the “concerned” telephoner was invited to, but didn’t, use a procedure to slow down payment to the potential conservatee, a judge looking into the situation might have more empathy for an administrator’s decision to pay the named beneficiary absent any reason not to.

[Kansas401k]

Thanks so much for the great input! I don't know if we have the name or number of the concerned caller but I'll find out and go from there!