Designation of Beneficiary Form

 A newly eligible participant is filling out her DOB.  She and her husband have been separated for 16 years.  They file their taxes separately.  She listed her son as the beneficiary of her 401k balance.  Is there any reason why she can't list the son as primary?  Does separated spouse need to sign off on that?   Any ideas or sites that I can go to to clarify this issue?  Thanks!

Is this a 401(k) or profit sharing plan that is exempt from QJSA?

The rule to be exempt from QJSA is that the spouse must be the sole beneficiary of the entire account balance. If the participant wants to designate someone else as the beneficiary, the spouse must consent.

So even if they are "legally separated" - the spouse still  must sign off.  This should be interesting since they haven't had any correspondence in over 10 years. Thanks.

As always, Read The Fabulous Document and ERISA § 205.

Is a separated spouse a spouse for spouse’s-consent purposes?

Yes. No matter how long a separation continues, a marriage does not end until a court orders the divorce. See Davis v. College Suppliers Co., 813 F. Supp. 1234 (S.D. Miss. 1993). Just to pick one example, although a husband and wife were separated for the last 15 years of their 19 years’ marriage, they remained spouses until the participant’s death. Further, their written separation agreement had no effect under his retirement plan, and the surviving spouse was entitled to her qualified preretirement survivor annuity. Board of Trustees of the Equity-League Pension Trust Fund v. Royce, 238 F.3d 177, 25 Empl. Benefits Cas. (BL) 2394 (2d Cir. 2001).

Likewise, a division of the spouses’ marital property does not end the marriage. For example, Callegari v. Scottrade, Inc., No. 16-1750, 2016 U.S. Dist. LEXIS 105468 (E.D. La. Aug. 10, 2016) (court-approved consent judgment to separate community property did not end the marriage); Gallagher v. Gallagher, No. 12-40027-TSH, 57 Empl. Benefits Cas. (BL) 2648, 2013 U.S. Dist. LEXIS 26061 (D. Mass. Feb. 26, 2013).

What about a legal separation?

A plan’s governing documents may (but need not) provide that a spouse’s consent is excused if the plan’s administrator decides (1) the participant and the spouse are legally separated, (2) the participant has a court order to that effect, and (3) no QDRO requires the spouse’s consent. See 26 C.F.R. § 1.401(a)-20, A-27. The combination of these three conditions is unlikely.

Divorce?

After 16 years’ separation, one imagines the participant likely has sufficient grounds to obtain a divorce.

None of this is accounting, tax, or legal advice to anyone.

Link to IRS reg cited by @Peter Gulia above:  https://www.ecfr.gov/current/title-26/section-1.401(a)-20.

If the participant in the original post wants to name her child as beneficiary, a divorce is (likely) necessary.  But she should also be aware that doing so, followed by a subsequent remarriage, will (again, likely) cause an automatic change in that designation.

Wait!  This gal is a new participant?  What has she been doing for the past 16 years?  Did she hold another job during those past 16 years?  Did that job provide her with pension and retirement benefits?  By not pursing a divorce for 16 years has she presumptively given her husband a good shot at receiving 50% of those pension and retirement benefits?  N.B. there is nothing in the law that requires married couples to live together.  [Religious beliefs don't matter under ERISA.] A 16 year separation with no divorce sounds like a voluntary arrangement.  Does he have pension and retirement benefits to which she might be entitled?

And now she is concerned about his consent to naming someone else?   There are more questions here than answers.  Tell her to file for divorce and the problem will disappear.  

Here is a decent summary of the matter - https://www.sslawoffices.com/retirement-planning/401k-beneficiary-rules-based-on-marital-status/#:~:text=If you are married%2C by,spouse to sign a waiver.

Many plan administrators and their third-party administrators, recordkeepers, and other service providers limit their communications to describing what the plan’s administration will or won’t do, and avoid suggestions about what an individual should do.

Suggestions that might be sensible if a domestic-relations lawyer or an estate-planning lawyer presents them could be inapt or unwise for a nonlawyer service provider to present. That might be especially so when a service provider routinely warns that it does not provide tax or legal advice.

Further, a service provider might have much less than complete information about an individual’s facts and circumstances.

On 2/5/2024 at 9:02 AM, Pammie57 said:

So even if they are "legally separated" - the spouse still  must sign off.  This should be interesting since they haven't had any correspondence in over 10 years. Thanks.

What if she does NOT assign a beneficiary at all and puts her son into a will or trust instead - to inherit her 401k?

Under an ERISA-governed individual-account (defined-contribution) retirement plan’s typical provisions, the default regime for the absence of the participant’s affirmative beneficiary designation begins with the participant’s surviving spouse.

If the participant’s (not yet divorced) husband survives the participant, the typical provisions would provide the death benefit—typically, the whole of it—to the husband.

ERISA § 205(b)(1)(C), 29 U.S.C. § 1055(b)(1)(C) http://uscode.house.gov/view.xhtml?req=(title:29%20section:1055%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1055)&f=treesort&edition=prelim&num=0&jumpTo=true.