Spousal Consent and Power of Attorney

I have participant who would like to name his daughter as his primary beneficiary on all retirement plan related accounts. The participant's wife is so impaired she is unable to execute a spousal consent on the beneficiary designation. The participant has Power of Attorney for all purposes regrading his wife. Is this sufficient for the spousal consent section of his beneficiary designation?

If the plan is ERISA-governed:

Does a document governing the plan preclude recognizing a power of attorney?

Does a document governing the plan allow recognizing a power of attorney?

Does a document recognize an agent only under a participant’s power of attorney? Or does a document recognize also a spouse’s power of attorney?

Are the documents governing the plan silent about recognizing or refusing a power of attorney?

Does a document governing the plan grant the plan’s administrator discretion about recognizing or refusing a power of attorney?

(This note uses administrator to refer to a person that fits ERISA’s definition, not a nondiscretionary service provider.)

If the administrator has discretion, has the administrator adopted a written procedure?

Or, has the administrator adopted an unwritten procedure?

If the administrator yet has no procedure, what advice has the administrator obtained about designing a procedure that would meet the administrator’s ERISA § 404(a) responsibility?

Does the administrator have someone with enough law training to read a power-of-attorney document and evaluate what powers the document grants, restricts, or omits?

Will the administrator require that the power’s maker have acknowledged it before a notary (even if no relevant State law requires that)?

Will the administrator require that the power’s making have witnesses (even if no relevant State law requires that)? Will the administrator require a notarial act about the witnessing?

Even if the power states it grants the agent power to do anything the maker could do, will the administrator require an express grant of specific authority to consent to the participant naming a beneficiary other than the participant’s spouse?

Might the administrator prefer that the spouse’s consent be made by a court-supervised conservator?

See 26 C.F.R. § 1.401(a)-20, at Q&A-27 https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401(a)-20.

(Without interfering with the power-of-attorney agent’s other powers, a court might grant a limited conservatorship to decide only whether to make the spouse’s consent.)

An administrator might consider that Congress’s 1984 revision of ERISA § 205 sought to preclude a participant’s election done without the spouse’s consent in an act that is independent of the participant.

An administrator might balance the plan’s and its fiduciaries’ interests in protections, the spouse’s interest in independent decision-making in the spouse’s interests, and the participant’s interest in not being burdened by inappropriate expenses.

This is not advice to anyone.

Is the impaired wife merely unable to execute a spousal consent on the beneficiary designation, or is she so cognitively impaired that she doesn't understand what she is being asked to consent to?   I think it might be better for the family to go to court and ask for the appointment of a guardian for the wife.  The guardian will be invested with the power to make a decision about whether it is in the wife's best interest to consent to a change in the beneficiary. 

Even if the Plan Documents permit the use of a power of attorney as suggested by Peter, keep in mind that Plan Administrators have a fiduciary duty toward the participant and the beneficiary and you don't want to be seen as promoting or facilitating the interests of one over the other. I would be very careful. 

What will happen to the wife when dad dies and the daughter is now the beneficiary?  Will the daughter take care of mom?  If so, then why not appoint the daughter as the guardian of the person and of the property of the wife?   

fmsinc, thank you for your observations about what one or more family members might consider.

A retirement plan’s administrator’s focus often is limited to deciding whether to approve or deny a claim, or accept or decline a participant’s election or other choice.

An administrator might have nothing to consider until a participant submits a beneficiary change.

As noted above, an administrator, to the extent of its discretion, might prefer that the spouse’s consent be made by a court-supervised conservator.

Some might interpret that ERISA § 205 or the plan requires that the decision-making for the spouse bear some independence from the participant that a power-of-attorney agency might not provide, especially if the spouse’s agent would be the participant.

(Although the Treasury’s interpretation refers to a guardian, I find it helpful to think of the distinction between a guardian of the person and a conservator of the person’s property. I recognize many States’ laws and many people use different lingo.)

fmsinc, it’s good that you mention a plan fiduciary’s duty of impartiality.

This is not advice to anyone.

Thank you for the insightful responses. In this specific case, the plan only has 4 participants; two owners, a spouse and 1 unvested employee.  The participant in question is actually one of the plan fiduciaries. His wife is in a memory care facility and unable to cognitively sign the spousal consent form. He has power of attorney for all medical and financial decisions. The participant and his wife only have 1 daughter (whom he wants to list as his beneficiary) and he has already established a trust to care for his wife if something happens to him. Upon reviewing the Plan Document, it appears to give discretion to the Plan Administrator. 

Peter Gulia:  

In EBSA Advisory Opinion 1999-13A - https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/advisory-opinions/1999-13a 

the author begins as follows: 

        "This is in response to your request on behalf of the UAL Corporation (UAL) and United Air Lines, Inc. (United) for an advisory opinion. Specifically, you ask how a plan administrator should treat domestic relations orders the plan administrator has reason to believe are "sham" or "questionable in nature."

Later on the Opinion continues:

         "You have asked for an advisory opinion as to whether, and if so when, a plan administrator may investigate or question a domestic relations order submitted for review to determine whether it is a valid "domestic relations order" under State law for purposes of section 206(d)(3)(B) of ERISA." 

The response was as follows inter alia:

        "When a pension plan receives an order requiring that all or a part of the benefits payable with respect to a participant be paid to an alternate payee, the plan administrator must determine that the judgment, decree or order is a "domestic relations order" within the meaning of section 206(d)(3)(B)(ii) of ERISA — i.e., that it relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of the participant and that it is made pursuant to State domestic relations law by a State authority with jurisdiction over such matters. Additionally, the plan administrator must determine that the order is qualified under the requirements of section 206(d)(3) of ERISA. It is the view of the Department that the plan administrator is not required by section 206(d)(3) or any other provision of Title I to review the correctness of a determination by a competent State authority pursuant to State domestic relations law that the parties are entitled to a judgment of divorce. See 92-17A (Aug. 21, 1992). Nevertheless, a plan administrator who has received a document purporting to be a domestic relations order must carry out his or her responsibilities under section 206(d)(3) in a manner consistent with the general fiduciary duties in part 4 of title I of ERISA."

        "For example, if the plan administrator has received evidence calling into question the validity of an order relating to marital property rights under State domestic relations law, the plan administrator is not free to ignore that information. Information indicating that an order was fraudulently obtained calls into question whether the order was issued pursuant to State domestic relations law, and therefore whether the order is a "domestic relations order" under section 206(d)(3)(C). When made aware of such evidence, the administrator must take reasonable steps to determine its credibility. If the administrator determines that the evidence is credible, the administrator must decide how best to resolve the question of the validity of the order without inappropriately spending plan assets or inappropriately involving the plan in the State domestic relations proceeding. The appropriate course of action will depend on the actual facts and circumstances of the particular case and may vary depending on the fiduciary's exercise of discretion. However, in these circumstances, we note that appropriate action could include relaying the evidence of invalidity to the State court or agency that issued the order and informing the court or agency that its resolution of the matter may affect the administrator's determination of whether the order is a QDRO under ERISA.5(5) The plan administrator's ultimate treatment of the order could then be guided by the State court or agency's response as to the validity of the order under State law. If, however, the administrator is unable to obtain a response from the court or agency within a reasonable time, the administrator may not independently determine that the order is not valid under State law and therefore is not a "domestic relations order" under section 206(d)(3)(C), but should rather proceed with the determination of whether the order is a QDRO." 

This opinion relates to a QDRO situation but I think it's instructive.  A Plan Administrator should not ignore the obvious conclusions that might be drawn from suspicious facts.  As a lawyer I live in a cynical world.  I don't expect the best from people.  I see and therefore expect the worst.  I don't even trust my clients or opposing counsel or the judge on the bench.  I am super cautious in advising my clients.   It is expensive for a Plan to defend a lawsuit.  If the Plan loses they will pay legal fees to the Plaintiff attorney and may wind up paying benefits twice.  

Here is a comment I made to one of your posts in 2022: 

"Posted August 6, 2022

"Peter:  I found it, at least some of it.  The case I mentioned was a 1999 case filed in the US District Court for the District of Maryland (Baltimore),  Bowersox v. Bell Atlantic, No. 99-cv-176-CCB.  The docket entries are attached.  I don't have access to Pacer so this is about as far as I can go.  

"I realize the law may have changed in 23 years, but my recollection of the case is that the Plaintiff had either stolen or embezzled or maybe even negligent caused a loss and Bell Atlantic tried to access her 401(k) Plan as self help restitution.  My files from those days are long gone and I cannot identify a memo of points and authorities from the docket entries."

Bell Atlantic became convinced that they would lose if they continued, dismissed their case and paid me and my colleague $32,000 in legal fees. In today's dollars that would be about $62,000. 

If I was avising the Plan administrator under the facts presented by ejohnke, I would tell him NOT to put himself in the middle by exercising "discretion". That is a sure way to put one's head on the chopping block.  He doesn't know what he doesn't know.  And......

https://www.azquotes.com/picture-quotes/quote-distrust-and-caution-are-the-parents-of-security-benjamin-franklin-10-19-46.jpg

There a times to be daring and time to be cautious. Let the parties resolve the matter in court. 

David

DSG, throughout this discussion thread, I didn’t express a conclusion on ejohnke’s question, or even on several questions I mentioned as possibilities for a plan’s administrator to consider in its interpretations, analysis, and decision-making.

And my observation above was that an administrator might prefer that the spouse’s consent be made by a court-supervised conservator.