Does a disclaimer revive a beneficiary designation

A participant executes a beneficiary designation naming her son as beneficiary.  She was not married at the time of the designation.  Within a year, she gets married.  She does not change the beneficiary designation and does not have her new spouse sign the consent.  She passes away.  Under the plan, the new spouse is the beneficiary because he did not consent to the beneficiary designation.  The new spouse wants to disclaim.  Does his disclaimer, where he is treated as predeceasing the participant, revive the previous beneficiary designation such that the son becomes the beneficiary?   

With its lawyer’s advice, a plan’s administrator might consider:

Do the plan’s governing documents recognize a disclaimer? Do the documents preclude a disclaimer? Are the documents silent on whether a disclaimer is recognized or precluded?

If the documents are silent and the administrator has discretionary powers to interpret the plan, the administrator would prudently consider the plan’s purposes and circumstances to discern whether to recognize a disclaimer.

If the administrator decides to recognize a disclaimer, it might require a disclaimer that (at least) meets the conditions of Internal Revenue Code § 2518. See IRS Gen. Couns. Mem. 39,858 (Sept. 9, 1991); Ltr. Ruls. 92-26-058, 90-37-048, 89-22-036.

If a beneficiary makes a valid disclaimer that the retirement plan’s administrator accepts, the plan benefit’s will be distributed (or distributable) as if the beneficiary/disclaimant had died before the participant’s death (or before the creation of the benefit disclaimed). See generally Unif. Disclaimer of Property Interests Act (1999, amended 2006), 8A U.L.A. 281–331 (2014) & Supp. (2021); Unif. Disclaimer of Property Interests Act (1978), 8A U.L.A. 333–349 (2014).

Also, if a beneficiary makes and delivers, within nine months of the participant’s death, a qualified disclaimer the retirement plan accepts, the disclaimant is treated as not a beneficiary for tax-law minimum-distribution conditions. Prop. Treas. Reg. § 1.401(a)(9)-4(c)(2)(ii).

An administrator should read carefully the plan’s governing documents and the particular beneficiary designation to discern the effects of them and whether the surviving spouse’s disclaimer “revives” a beneficiary designation that otherwise might have been precluded by the plan’s provision for a surviving spouse.

I'd have a hard time buying the "revival" of a form which was superseded upon the marriage.  But, I could readily believe that if the spouse disclaims, that the "next in line" would have then be determined under any default language in the document....which could possibly make the decedent's issue he whom would be next to consider, anyway.

While plans vary (and many are ambiguous), a plan’s administrator (using its powers to construe and interpret the plan) might treat a surviving spouse’s disclaimer as removing the spouse from those of the plan’s provisions that require treating a spouse as a participant’s beneficiary. If so, and especially for a beneficiary designation made before its maker had a spouse, the effect might be to recognize the participant’s designation of a (non-spouse) beneficiary.

Depending on what beneficiary designation a participant made and which persons might become direct or ultimate takers under a plan’s provision for a default beneficiary, the disclaimer reasoning and the default reasoning might result in the same or different takers.

On 6/30/2022 at 11:13 AM, Bri said:

I'd have a hard time buying the "revival" of a form which was superseded upon the marriage.  But, I could readily believe that if the spouse disclaims, that the "next in line" would have then be determined under any default language in the document....which could possibly make the decedent's issue he whom would be next to consider, anyway.

 

On 7/1/2022 at 8:38 AM, Peter Gulia said:

While plans vary (and many are ambiguous), a plan’s administrator (using its powers to construe and interpret the plan) might treat a surviving spouse’s disclaimer as removing the spouse from those of the plan’s provisions that require treating a spouse as a participant’s beneficiary. If so, and especially for a beneficiary designation made before its maker had a spouse, the effect might be to recognize the participant’s designation of a (non-spouse) beneficiary.

Depending on what beneficiary designation a participant made and which persons might become direct or ultimate takers under a plan’s provision for a default beneficiary, the disclaimer reasoning and the default reasoning might result in the same or different takers.

You'd really need to review the plan language and the wording of the beneficiary designation as well. It might say something like, "Marriage will be treated as a revocation of any existing beneficiary designation," or alternatively, "A beneficiary designation will be treated as suspended if the participant marries...."

If she only had the one son, he would almost certainly get it all anyway, which would make things easy. If there are multiple children, I would be REALLY cautious.

Just to be thorough: was the "new" marriage at least 12 months? If not, does the plan use the 12-month rule?

David Rigby reminds us that a disclaimer might have no practical effect if the disclaimant has no benefit to disclaim.

ERISA § 205(f) permits a plan to omit a qualified joint and survivor annuity or a qualified preretirement survivor annuity if the participant and the spouse had not been married (or treated as married) throughout the one-year period ending on the participant’s annuity starting date or death.

I read § 205(f)’s variation as mattering only if the plan otherwise would provide a QJSA or QPSA.

But many individual-account plans lack a survivor annuity, and instead provide a surviving spouse the whole of the participant’s nonforfeitable accrued benefit. See ERISA § 205(b)(1)(C)(i).

The discussion above considers what consequences might result if a surviving spouse has a benefit but disclaims it in a disclaimer the plan’s administrator accepts.

Unfortunately, the plan does not have the one-year language.  It also does not have any language revoking the beneficiary designation upon marriage.  Luckily, the options are to pay it to the son under the beneficiary designation or pay it to the estate under the plan with the son being the only beneficiary of the estate.  The plan specifically indicates that it is excluded from the QJSA/QPSA rules.  It pays out in a lump sum.  The plan requires that the benefit be paid to a spouse if there is one, unless the spouse consents. If there isn't a spouse or a beneficiary designation, it pays to the estate.  One other option we were thinking about is simply having the spouse consent to the beneficiary designation as it does not appear that the language in the statute requiring the consent to be signed within the "applicable period" applies to the non-QJSA/QPSA plan.