Very strange and possibly insurmountable retirement plan hurdle

[scarabrad]

Hi esteemed experts!

Not in the business but have benefitted greatly from your input and expertise as I navigate retirement planning for my own business.

Here's a strange situation and I am looking for some basic guidance. Bullet points for simplicity

1) My masseuse is vietnamese.  Her sister's spouse/sig-other passes away suddenly. He has assets in a 401k

2) The deceased did not trust his wife with funds (and they were not legally married) so he decided to put my masseuse (his sister in law) as the beneficiary of the 401k assets with the understanding that funds would be used for the benefit of the deceased's child (single child).

3)  Somehow, the beneficiary name was my masseuses first name and the deceased's LAST name (they are unrelated and not married).  The deceased, apparently, did not understand English well, nor the ramifications of this but thought if he put his sister-in-law's first name and his last name, that somehow it would work out in the end.

4) So.....401k has a non-existent sole beneficiary (there is NO ONE with the legal name ascribed to beneficiary status, essentially a made up name), the deceased was never officially married to the now widow and the intent was for the 401k to go the widow's sister for management purposes (my masseuse, a very intelligent, caring and trustworthy individual).

I have offered to call the 401k admin to explain the situation and get some advise (I believe it's empower), but they won't talk to anyone who isn't associated with the account (not my masseuse, not the widow, no one), nor will the employer get involved.

How does one even begin to address this (state of Massachusetts).  Will the assets eventually escheat to the state? Are we talking legal counsel and a drawn out process? To top it off, no one knows how much the assets are and whether or not it is even worth pursuing (could be hundreds, could be hundreds of thousands).

Any takers for this bizarro situation?

Thank you!

SR

[CuseFan]

Mass does not recognize common law marriage from what I see, so I do not see the plan as recognizing her as the surviving spouse.

There was no valid beneficiary designation, so the plan provisions concerning such would/should be followed. These may specify some sort of hierarchy of persons - spouse, children, parents, siblings, etc. - or may simply default to the estate.

If the funds go to his child, whether directly or through the estate and the child is a minor, then (assuming plan provisions or state law supports ) I would expect the distribution would be paid to the child's legal guardian, which I assume is the mother. 

No explanation of intent without valid backup and official documentation will carry any weight with the Plan Administrator. 

Your masseuse (child's aunt/mother's sister) may be able to assist her sister in making a claim to the plan on behalf of her child as legal guardian, but beyond that, managing funds for support of the child is another conversation (family law/trust?) well outside on what I'm able to opine.

None of this is legal advice.

[scarabrad]

That is super helpful as is.  No one can get any details whatsoever on the plan provisions so not sure where they can go from here. Tough situation for the entire family as no one really knows how to proceed (thus why I have offered to get involved).

Much appreciated!

SR

[fmsinc]

If there is nobody named as the beneficiary of the 401(k), then the Plan will normally pay it to the person named in the order of precedence set forth in the Plan Documents, of if there is no order of precedence, then it will be paid in accordance with the applicable state law re: testate or intestate distribution. 

Or the Plan may file an interpleader action and deposit the funds into the Registry of the Court and wash their hands of the matter. 

In your case it looks like the child of the decedent will be the one to receive the money (assuming he/she is the only child), but somebody will have to be named as guardian of the property of the  child if he/she is a minor, and that guardian is likely to be the child's mother.  

DSG

 

[C. B. Zeller]

Hold up a second. Is Empower actually the Plan Administrator, or merely a service provider? I'm using Plan Administrator in the ERISA sense; that is, the person who has the authority and responsibility to interpret the plan documents, approve claims for benefits, and determine the beneficiary of a deceased participant.

Typically the Plan Administrator is the employer sponsoring the plan. Your masseuse should request a copy of the summary plan description (SPD) which will identify the Plan Administrator and list their contact info. Your masseuse almost certainly has at least a "colorable" claim to benefits (see Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989)), so she is entitled to receive the SPD, no matter what Empower says. If the front line customer service rep disagrees, cite Firestone to them and that should get them to escalate the issue to someone who understands.

If the Plan Administrator does not provide the SPD, they could be subject to a penalty of up to $110 per day under section 502(c)(1) of ERISA.

Once you have the SPD, find the section that describes the plan's claims procedures. Follow those procedures, including the procedures for how to appeal a denied claim for benefits, and see where that gets you. At the very least this will give you the opportunity to make your case before the person who has the authority to make a decision on it.

[QDROphile]

Unfortunately, a threat of some personal liability is what is sometimes required for a breakthrough. It often starts with a service provider that is not an ERISA “plan administrator” being reminded/threatened that it becomes an ERISA fiduciary if it steps into activity that is the province of the ERISA plan administrator, such as any discretionary action, which includes interpretation of plan terms (which also includes plan policies). TPAs will readily toss the hot potato to the fiduciary. Beware that the fiduciary (who may have just discovered its role) will be looking for help and the TPA may be willing to advise under the table, so it may take continued pressure to get the fiduciary to really step up to proper performance (e.g. getting advice of legal counsel in any hot or complicated matter).

 

[scarabrad]

Supremely helpful and I greatly appreciate the input.  As it turns out, there are 2 children of the deceased, a 31 yo competent independent adult and her brother who apparently has fairly severe autism and cannot manage his affairs.  The family is relatively clueless with respect to financial affairs and that's where I have offered to help, as a completely independent bystander/family friend.  No one has any clue how much the decease accumulated over his 10+ year work career. It could be a pittance or reasonably sizeable. Ultimately, the intent was to provide some support for the autistic child (that is the general sense I get from discussions with the family).  I am not a lawyer nor do I have any semblance of power of attorney to step in and am only getting involved because I am reasonably financially savvy, love a challenge and yes, get the best massage on the planet from my masseuse.  Adds several days or months to my life.

Thank you, again, for your input. I'll keep you all posted as developments arise.

[fmsinc]

What are your questions?  

Was deceased married at the time of his/her death? 

Was he/she in litigation for a divorce?

Had a QDRO been entered by a court at the time of the divorce?

What was exact name of the plan to which the QDRO was directed?  

Did he/she have a Last Will and Testament?

Did he/she set up a trust for the disabled child prior to his/her death? 

Was it a special needs trust?

Was the deceased receiving SSI or SSDI for the disabled child? 

Was the deceased receiving child support or other public benefits for the disabled child? 

Is the disabled child eligible for or receiving Medicaid?

What were the living arrangements for the disabled child at the time of the deceased party's death?

Did the deceased die under circumstance where his/her estate might have a claim for wrongful death? 

Did the deceased have a last will and testament? 

Did the deceased have life insurance on his/her life?

Identify all of the assets and liabilities of the deceased? 

Did the deceased have beneficiary designations with respect to all of his/her pension, retirement, investment assets, bank accounts, ete?  

Does the deceased have a name so I can stop referring to him/her as he/she? 

Prepare a family tree.  

Prepare a timeline of relevant events.