Do you require that a beneficiary designation be ink-on-paper?

[Peter Gulia]

Assume, for a retirement plan:

A beneficiary designation states that the participant has no spouse.

That statement is logically consistent with the employer/administrator’s records about the participant’s health coverage.

Nothing in the plan’s documents requires that a beneficiary designation (if it needs no spouse’s consent) be witnessed by, or acknowledged before, anyone.

The beneficiary designation is not made through the plan’s identity-controlled internet site.

For such a beneficiary designation, do you:

Require an original ink-on-paper form showing the maker’s signature?

-or-

Permit a fax, scan, or other copy as a possibly valid beneficiary designation?

For either answer, why do you require ink-on-paper, or permit a copy?

If you permit a copy, what controls do you use to guard against a writing that is not the participant’s act?

[Peter Gulia]

If the only evidence of what might be a beneficiary designation is a fax, how do you check that what looks like a signature IS the participant's signature?

 

[Paul I]

If all you have is a fax, there really is no way to confirm the authenticity of the signature.  Today's image processing technology makes it fairly easy to grab a signature image from another source and apply it to a fax document. 

It can help to have some contemporaneous validation steps together with the transmission of the fax similar to steps taken with multi-factor authentication with texted verification codes to a known user phone.

[Peter Gulia]

Paul I, thank you for your helpful observation, and your useful suggestion.

Yet, people who make a beneficiary designation on a paper form might do so because they lack a personal computer, smartphone, or other internet-enabled device (or choose not to use it).

Some recordkeepers’ services are designed to not release a beneficiary-designation form until the recordkeeper has sufficiently identified the requester as the plan’s participant. And then, they mail the form only to the address of record. That slows down (or helps a plan’s fiduciary detect) some forgeries, but many still get through.

Beyond urging participants to make beneficiary designations through the plan’s website, are there other steps to consider?

[Paul I]

I have seen two approaches that could be helpful.  The first is all beneficiaries are subject to the same signing requirements as are used for the spousal consent.  The requires notarization of the signature even if there is no spouse.

The second is all beneficiary designations must be made through the plan's service provider and this is written into the plan and the SPD.  This has led to some problems with situations like designations made near death, but challenges to the requirement have not been successful.

One could consider having the plan allow the use of either of these approaches.

[Peter Gulia]

Thanks again.

I had thought about the notary idea.

The plans I’m thinking about do everything with the recordkeeper. The plan’s sponsor/administrator receives nothing. Every form or other plan communication includes (after the internet and telephone means) the recordkeeper’s maildrop for the act or instruction involved. Required disclosures even give the recordkeeper’s address as the plan administrator’s address.

Forms possibly made or perhaps forged near the participant’s death are the most troublesome.

And we don’t know how many forms are forged by a former spouse or soon-to-be former spouse.