family status changes - dropping spouses

[rocknrolls2]

Employee advises employer of legal separation with spouse and drops him/her as dependent. A few months later, the dropped spouse notifies the employer that there was no legal separation and that he/she should not have been dropped. To what extent does the plan administrator have a right to rely on the employee's representation in connection with a change in family status? In the joint and survivor annuity area, ERISA provides that if the fiduciary was prudent in relying on participant representation of no spouse, there is no liability. Here, there is no duty of spousal consent, so there would appear to be no specific duty to investigate the participant's claim. Any thoughts?

[KIP KRAUS]

SBorrow:

Legal separation to me means that there must be a legal written document that describes the "legal Separation", without such evidence, we do not allow a change in family status change for separation.

The other thing that occurs to me is that if in fact the change was allowed,and the employer was subject to COBRA, the former spouse would have know about the dropping of coverage well befor a "fwe Months".

In any event, I would argue that the Plan administrator/Employer would be reasonably expected to verify a legal separation or divorce befor acting in an employee's statement.

[Kirk Maldonado]

I wrote an article on this very topic. If you would like a copy of it, send me your e-mail address. P.S., I believe the employer is in trouble.

[rocknrolls2]

Thanks Kip and Kirk! However, there is a bit of kicker. What if the cafeteria plan imposes a 31 day limit on requesting changes in status(e.g., You get divorced on July 31. You have until August 31 to request a change in status)? In many cases, hard documentation may not be available.

[KIP KRAUS]

sborrow:

Are we still talking about the same case as posted on 10/15? If so, there seems to be a few holes yet. I haven’t had to opportunity to read Kirk Maldonad’s article. However, I agree with him that the employer could be in trouble.

I wouldn’t mix up the ERISA language regarding J&S benefits and the employer relying on participant’s representation that he/she has no spouse with the responsibility of an employer to be reasonably sure that an employee none to be married has been legally separated. In my opinion, the employer should require reasonable evidence that the employee is legally separated in order to project the integrity of the tax-exempt status of the cafeteria plan.

Did the employer issue a COBRA notice to the alleged former spouse? If so, and it was timely, the alleged former spouse would have known within the 31 day period for cafeteria plan changes.

In any event, keeping in mind that I’m no lawyer, I would advise the employer to pursue reinstating the spouse and pay the back premiums. The employee can then drop his/her spouse at open enrollment.

Hope this helps.

[Guest nb]

Kirk, I would like a copy of the article but your profile does not have an email address. Could you send a copy to me.

Thanks

[Guest nb]

I have a question as to the difference in definition of "legal seperation" and being "legally seperated". Does anyone have a good reference as to the diference?

Who requires documentation of the family status change? What type?