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Please help me collect death benefits from my ex-husband's 401(k) plan


Guest StephPait

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Guest StephPait

I was named beneficiary of my ex-husbands 401k plan. He worked at this company while we were married, and left them before we divorced, retaining his 401k plan with them. We agreed to leave me as beneficiary mainly because we have children, I in turn left some of my policies in his name.

He passed away last year and I could find no paper work to contact this company, until they mailed me last month. I promptly called them and was told I was still beneficiary of his 401k. I was asked to supply several pieces of information to verify all this. When I informed them we had divorced the lady became very curt and stated simply that I was entitled to nothing because we had divorced. I explained that we had not known that a divorce would affect this or we certainly would have not left it this way. She said she could not help me, that she was following federal guidelines that stated I received nothing if we were not legally married at the time of his death. She then asked me to obtain and send her a copy of his death certificate so she could close out his account with the company and that the company would absorb all funds from this account. I asked for the policy and the federal guidelines that she said she must follow to be sent to me and she said she could not do that. I am now at a loss as to what to do. If I have no rights to the funds, so be it, but don't I at least deserve to see the paperwork? She also said I may need to sign a paper stating I am not entitled to anything. I have looked for information on this and can find nothing really helpful. My ex-husband was only 35, so he did not reach retirement age, is this the reasoning behind no benefits? Can someone enlighten me on this subject and possibly where to find these federal regulations she spoke of? I tried to get answers from her but she said she could tell me nothing more, once she confirmed I was divorced, even with me named as his beneficiary. Thanks so much.

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This smells pretty bad. In most 401(k) plans, the death benefit is the entire account balance, but it might not be. The first question to answer: is there a qualified domestic relations order (QDRO)? Since you did not mention it, we assume the answer is no, but it is still important to ask. The next question is about vesting: was he vested at the time he left employment? If so, what percentage?

Next, you will need some information about exactly what death benefit is defined in the plan. You should write (do not call) the retirement committee (the plan probably authorizes a committee to have administrative authority in day-to-day operations, but the committee makes the big decisions) and request information about your benefit. It is probably not necessary to relate your phone conversation; just state that you are the beneficiary of record. Identify yourself by name, SSN, and address. You can request a summary plan description (SPD). This should have a brief summary of the provisions, including death benefits. But take note that since he severed employment, the plan may not pay the same death benefit as it would upon the death of an active employee. Do it today!

If you would like some additional help, please post.

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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Guest StephPait

Thank you so much for replying, yes I do need additional help. Whom do I address this letter to, (I wasnt aware of any committee)? All I have is the address of the person who contacted me, she told me she dealt with these things and provided no other addresses. There was no QDRO in our divorce, we simply agreed to leave things as they were, he named me as spouse (since we were married) and as beneficiary just in case we werent ( we both assumed that would be enough to guarantee that the children and I would benefit somewhat, this was about 1987). The only thing I can figure out is that possibly the plan he was under revised somewhere along the way, to not include ex-spouses, and he was not notified of a change (I have been researching everywhere). Several things bother me about this though, one is that up until a couple of years ago I received letters from this company about the benefits and retirement, then they just stopped, these letters were more just statements than anything else. My ex-husband knew I was getting them and said just keep them, or toss them, he was working elsewhere and didnt want to bothered with sporadic mail. Throughout the years I've lost the papers I had saved, and as I said I stopped getting them, I asked his mother and she has received nothing either. Til this letter they mailed me. As for being vested, I honestly am not sure what that means, the letter simply stated he had vested interests in the company and benefits. During the conversation, I was told a cash payout because of his death would be in excess of 50k, and retirement (if I chose that) would be over 100k. I have no idea if he had anything other than the 401k, that she mentioned, with the company. It was over 12 years ago when he started work there. I have no paperwork at all to help me, with the exception of this letter from them. When this plan was started we were married, I was not working and we assumed (probably wrongly) that this was an investment in our future, and some small security for our children should anything happen.

This may be a naive question, but don't my children at least deserve the monies he paid in from his check during this period? And can you not name whomever you please as a beneficiary? Sorry to be so long in responding but this has me confused! Oh and if it matters my ex never remarried, and left no other children but the ones we have together.

Thank you again

Steph

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So many issues!

I suggest starting at the beginning. You should do the best you can to list all the facts, such as his date of hire, date he left employment, etc. Those are very important in establishing his vested status.

Vesting is "ownership". It means a nonforfeitable right to receive a benefit, usually at a later time. Most plans do not pay a benefit until an employee has severed employment, and may not pay until later, such as age 65, etc.

The next thing to determine is the type of plan. Is it a defined benefit (DB) plan, such as a traditional pension that pays the retiree $x per month, or a defined contribution (DC) plan, such as a 401(k)? This is extremely important, because in the former case, there may be NO death benefit in the case of unmarried participants. In the latter case, it is common that the acccount balance is the death benefit. Also, there might be more than one plan.

If the plan is a 401(k) or other type of DC plan, then any amounts that he put in are always 100% vested. The vesting percent will be used to determine the portion of the employer-provided benefit or contributions. But employee contributions in a DB plan are rare.

How large is this company? If not a small company, then there should be a committee. Address correspondence to the Retirement Committee.

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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If your description of your contact with the plan is accurate, the plan needs a visit from the Department of Labor and a call to the Department may get you the assistance that you need. But I agree that approaching the plan formally with a claim for benefits is appropriate in order to settle some facts and issues before reaching conclusions about the plan's behavior. If you can afford it, the assistance of someone knowledgeable in this area will go a long way --- a lawyer would be best. You may or may not be a beneficiary whether or not you got a domestic realtions order. You may or may not have a claim against your former spouse's estate.

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Another thought:

If you have your ex-husband named as your beneficiary anywhere, whether on employer-provided benefits or personal insurance, then you should change that ASAP.

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'm not aware of any legislation that prohibits an un-married plan participant from nameing anyone he choses as beneficiary to his 401(k)account. I am assuming he was not married to someone else at the time of death? If the plan truly is a plan established under IRC 401(k)any amount that he was 100% vested in should be payable to the benficiary of record. If the plan is not a 401(k) plan then there may not be a death benefit payable to anyone other than a surviving spouse.

You need to know, if in fact you are dealing with a 401(k) plan.

I also agree with QDROphile that you should contact the DOL and also file a written claim for benfits.

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There are alot of issues here. I would pretty much start with PAX advice and contact the DOL if necessary. One issue that is relevant, if the ex-husband never remarried and did not name a subsequent beneficiary and if somehow the ex-spouse isn't entitled, the kids would be beneficiaries by law in most states.

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Guest P A Weick

You need to see a lawyer who has knowledge of your state's probate laws as well as ERISA. The issue of whether state laws which automatically terminate beneficiary designations on divorce apply to ERISA accounts is being litigated right now before the US Supreme Court. When the benefit is somewhere between $50,000 and $100,000 you need good advice. Doing it on your own could leave you far worse off.

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