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Can payment of a "Benefit" be rescinded/revoked/voided if a Beneficiary makes a material misrepresentation to Plan Admin


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Hello All,

Yet another chapter in the ongoing saga of "Defined Benefit Issues". Question: Can a primary beneficiary, or for that matter ANY beneficiary have their right to a "benefit" voided/rescinded/revoked/etc. if said beneficiary makes a material misrepresentation ( signed written statement/assertion under penalty of perjury) to the Plan Administrator AFTER the original Plan Participant has passed(died) and before a  "payout" has been made by the Plan/Plan's Administrator  under the terms of said (ERISA-covered) Defined Benefit Plan ? Any thoughts and especially legal case citation would be IMMENSELY appreciated! Thanks! 

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Maybe you could put a little more flesh on that skeleton?

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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So most, if not all, plan administrators will ask a  designated "Primary Beneficiary" (or anyone requesting a payout of a "benefit") to complete a "Benefit Claim Form".  The format I am familiar with typically starts at the top by explaining the nature of the benefit including amounts and different options for payout(if applicable) from which the "beneficiary" may choose. Then what follows are a series of  "declarations"; pre-printed on the "claim form" that the "beneficiary" confirms by checking a box next to each individual phrase/declaration. Finally, at the bottom of the claim form there is a signature and date line where the "beneficiary" (as I'm referring to them) is to sign and date the claim form.  In print either directly above or below the signature line is language to the effect of : "By signing this form  you confirm, under penalties of perjury the accuracy/correctness of your responses to the statements above". 

  Now, say the person filling out the form "affirms" an obviously false statement, for example that they were still married to the deceased plan participant at ther time of their death, when, in  fact, they are divorced from the deceased.  Upon learning of the falsehood, which, potentionally, could affect a payout (or  might not ala' Egelhof v. Egelhof) could the Plan Administrator deny/revoke/attempt to recover any "payout" or , in this particular instance, might the administrator, determine based on established caselaw such as Egelhof v. Egelhof for example, and say "No harm no foul" or would they be obligated to perform further due diligence and/or look to some outside legal authority, such as the courts, to make any final determination ?

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First, any claim for benefits made by anyone other than the known participant should be scrutinized and require sufficient documentation to establish to the Plan Administrator's satisfaction that such person is entitled to a benefit.

If benefits have been claimed under misrepresentation then the PA/fiduciary should determine if any benefits have been paid in error and if so, whether to attempt to recoup. It is also noteworthy that the time limitations for doing so imposed by SECURE are specifically exempted in cases of fraud/misrepresentation.

Facts and circumstances, including amounts in question and funded status of the plan, should be considered as well.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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See my comments in all bold type. 

So most, if not all, plan administrators will ask a  designated "Primary Beneficiary" (or anyone requesting a payout of a "benefit") to complete a "Benefit Claim Form".  What is a "designated beneficiary?  A spouse?  A former spouse? A child? The format I am familiar with typically starts at the top by explaining the nature of the benefit including amounts and different options for payout(if applicable) from which the "beneficiary" may choose. What type of defined benefit plan?  Is it under ERISA? Then what follows are a series of  "declarations"; pre-printed on the "claim form" that the "beneficiary" confirms by checking a box next to each individual phrase/declaration. Finally, at the bottom of the claim form there is a signature and date line where the "beneficiary" (as I'm referring to them) is to sign and date the claim form.  In print either directly above or below the signature line is language to the effect of : "By signing this form  you confirm, under penalties of perjury the accuracy/correctness of your responses to the statements above". 

  Now, say the person filling out the form "affirms" an obviously false statement, for example that they were still married to the deceased plan participant at the time of their death, when, in  fact, they are divorced from the deceased. Are you setting forth a hypothetical or is that actually what happened your case. .  Upon learning of the falsehood, which, potentionally, could affect a payout (or  might not ala' Egelhof v. Egelhof) could the Plan Administrator deny/revoke/attempt to recover any "payout" or , in this particular instance, might the administrator, determine based on established caselaw such as Egelhof v. Egelhof for example, and say "No harm no foul" or would they be obligated to perform further due diligence and/or look to some outside legal authority, such as the courts, to make any final determination ?

Were the Participant and the former spouse married at the time the Participant retired and elected a QJSA as required by law (unless waived by the former spouse).  That election survived the divorce and the alleged misstatement is meaningless.  

If the Participant agreed,  or the Court in the Judgment of Divorce ordered, that the former spouse be the Alternate Payee of the Participant survivor annuity benefits, and a  QDRO was issued by the Court and approved by the Plan, then the alleged misstatement is meaningless. 

If the Participant agreed,  or the Court in the Judgment of Divorce ordered, that the former spouse be the Alternate Payee of the Participant survivor annuity benefits, and no QDRO was ever issued, then Pension Protection Act of 2006 would permit a posthumous QDRO, and the alleged misstatement is meaningless.

If the QDRO or the JAD or the Plan provides that upon the death of the Participant the Alternate Payee is to be treated as the beneficiary and as the surviving spouse of the Participant, then the alleged misstatement is meaningless.  

Egelhoff may or may not apply.  The language of the Plan Documents may or may not apply. 

DSG

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Thank you very much DSG your analysis. IMHOit  is "spot on" and yes , what you described in one of your scenarios is pretty much what occurred; hence my thought that the PA may, rhetorically speaking,  "No Harm No Foul" with regards to this ahem, "misstatement" ;).

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