401k participant dies - who are we dealing with?

We have a 401k plan participant who passed away recently.  Her spouse died a few years ago and there is no beneficiary named.

In this case then we would deal with her estate.

But how (far) and what verification is needed to determine who is responsible?  I assume we would need to see a copy of her will to see who is the named executor which would settle that.

But (gulp) if there is no will, what would be the procedure?  We can't just have a family member jump in without any verification and work everything out through them?

Thank you

That's a question that needs be directed to an attorney familiar with applicable state law.

I'm the executor of my Dad's estate.  After the court hearing to approve me as executor, the court provided a Letters Testamentary that shows I'm the executor of the estate.  I'm in Texas, but would expect something similar in other states. The client's legal counsel should be able to tell them what kind of documentation is needed to show who represents the estate. If the participant didn't have enough assets to justify opening an estate, most states have rules for dealing with small estates without formally opening an estate. Again, the client's legal counsel should be able to assist.

Just being named in the will as the executor doesn't necessarily mean they are the executor.  At least in my state, the executor has to be approved by the court, if an estate is opened. Approval may just be a formality, but I did have to agree to it.

For an ERISA-governed retirement plan, a situation in which, without another valid beneficiary designation, the plan-provided default beneficiary is the personal representative of the decedent’s estate, the plan’s administrator decides what evidence persuades the administrator to approve a claim.

A State’s law might be relevant in, and might support, an administrator’s fact-finding and decision-making about who is or isn’t a personal representative, and about whether the plan’s obligation to pay the decedent’s personal representative has been satisfied.

Yet, the claims procedure and a fiduciary’s decision-making are governed by the documents governing the plan, including an ERISA § 503 claims procedure, and ERISA’s title I.

Many administrators look for “letters testamentary” or “letters of administration”, or some other court order that grants or recognize a person’s authority to act for the decedent’s estate. And some administrators use further steps designed to test whether what’s presented as such a record or certificate is authentic or a forgery.

Some administrators might act following a claimant’s small-estate affidavit if it meets the conditions under a relevant State’s law and meets any further conditions the plan or its administrator imposes. Other administrators do not consider a small-estate affidavit. (For a background, including views that might differ from some of my observations, see https://benefitslink.com/boards/topic/63408-does-a-plan-pay-on-a-small-estate-affidavit/.)

If a plan’s administrator has not already done so, it should design, with its ERISA lawyer’s advice, a procedure for these situations—a procedure the administrator is ready to apply regularly, uniformly, and impartially, with no more than prudent plan-administration expense.

An obedient and prudent fiduciary follows one’s claims procedure (except insofar as it’s contrary to ERISA’s title I or other Federal law).

This is not advice to anyone.

Also understand if the estate is small enough in many states the beneficiaries of the estate can use a "small estate affidavit"  I am NOT an expert and it isn't really the TPA's job to educate people on them.  But we see them on a regular basis and it seems to allow a fair amount of skipping of the probate process.  

You now know close to 100% of what I know and I am not sure if I helped or not. 

9 hours ago, Santo Gold said:

In this case then we would deal with her estate.

We have seen mistakes in this area before, so I raise this question just as a caution.  The lack of a named beneficiary does not, by itself, default to the estate.  Virtually every plan will include a "line of succession" to determine a beneficiary, the last of which is the estate.  So ... has the plan definition of Beneficiary been reviewed?

Thank you everyone for the insightful replies.

And we find out that there is no will.  So, no beneficiary named, no spouse, no children, no will.  

The plan document only offers the following:

"No Designated Beneficiary. Unless otherwise provided in the Adoption Agreement, in the event that the Participant fails to designate a Beneficiary, or in the event that the Participant is predeceased by all designated primary and secondary Beneficiaries, the death benefit shall be payable to the Participant's spouse or, if there is no spouse, to the Participant's children in equal shares or, if there are no children to the Participant's estate."

The balance in the 401k plan for the deceased is around $4,000.

Will or no Will, I would think that the individual (in this case a brother-in law) who is handling the deceased affairs would need an affadavit or some other means to be able to act on her behalf.  While the deceased's is modest, I am told there is real estate matters that must be settled.  Action involving that matter would require some authorization allowing the BIL to handle those dealings.  That is probably a good starting point to see where that goes.

Thank you 

In the circumstances you describe, it seems unlikely that a small-estate-affidavit regime would be effective to transfer title to real property. Or, even if a person acting under a small-estate-affidavit regime could transfer real property, the value of the decedent’s estate (counting all assets) might be more than a State’s small-estate limit.

The IRS has directed EP examiners not to challenge a plan for a failure to meet a minimum-distribution provision when the plan’s administrator cannot identify the beneficiary.

This is not advice to anyone.

If the primary beneficiary predeceased the Participant, the first question is who is the next in line to inherit.  I most (?) Plans there is a order of precedence that will look something like this:

Designated Beneficiary: As stated in a signed, witnessed writing.
Widow/Widower: Spouse.
Children: Children and descendants of deceased children.
Parents: Surviving parents.
Executor/Administrator: Executor or administrator of the estate.
Next of Kin: Under state law

It appears that ERISA does not set forth a statutory order of precedence, but TSP does: 

1. To your spouse;
2. If none, to your child or children equally, and to descendants
of deceased children by representation;
3. If none, to your parents equally or to the surviving parent;
4. If none, to the appointed executor or administrator of your
estate; or
5. If none, to your next of kin who would be entitled to your estate
under the laws of the state in which you resided at the time
of your death.

and your state law will have a similar statute for intestate succession.  

In Maryland this is set forth in the following sections of the Estates and Trust Volume of the Maryland Code. 

§ 3–101. Property of estate not allocated by will
§ 3–102. Share of surviving spouse or domestic partner
§ 3–103. Division of net estate among surviving issue
§ 3–104. Absence of surviving issue
§ 3–105. Absence of heirs
§ 3–106. Advancements against shares
§ 3–107. After-born children of decedent
§ 3–108. Inheritance by parent or parent's relations
§ 3–109. Relation to decedent through two lines
§ 3–110. Survival requirements
§ 3–111. Surviving parents not entitled to distribution from child's estate
§ 3–112. Parents not entitled to distribution from abandoned child's estate

Once you figure out who the beneficiary(ies) will be, then you need to determine how to get the money to them.  Usually a family member will have opened an estate and you will deal with the Executor or Personal Representative of the estate.  If you know the identity of the beneficiary(ies) and they know they have money coming their way, they will quickly open the estate.  If that doesn't work our you need to talk to the Register of Will or the Orphan's Court, whatever they call it, and ask them what to do.  And of course you need to contact a local estates and trust lawyer. 

Of course you cannot keep the money.  And of course you need to monitor your Participants and make sure they have designated a beneficiary so this problem does not occur in the future.  And of course you should add an order of precedence to the Plan. .  

DSG, in circumstances like those Santo Gold describes, it can be proper for an ERISA-governed plan’s administrator to wait until a claimant has submitted a claim.

Then, the plan’s administrator (or its claims administrator, if the plan has such an allocation of fiduciary responsibilities) evaluates the claim.

To do so, a fiduciary would follow the documents governing the plan (which almost universally include a default-beneficiary provision, often like the one Santo Gold quotes above), and would follow the plan’s written claims procedure.

8 hours ago, Peter Gulia said:

it can be proper for an ERISA-governed plan’s administrator to wait until a claimant has submitted a claim

A situation that can become an infinite loop when a claim is in the wings but is not ripe to be made. For example, a QDRO-in-waiting that has not yet been submitted for qualification because a sponsor/participant's estate (which has already submitted letters testamentary to the TPA and stands in the shoes of the deceased sponsor/participant), cannot get the TPA to provide a current account statement.

I have a client with that very issue right now (you may recall I'm a QDRO lawyer). Trustee sponsor/participant of very small plan dies after the court enters a property settlement, scant paper records in the decedent's estate, no copy of an executed beneficiary form; estate counsel pretty much ERISA-clueless. Sponsor company has a DC plan TPA'd by one firm, and a cash balance plan administered by another TPA. The cash balance TPA won't pony up a current account statement to the estate administrator/PR, so neither the estate nor the alternate payee for that plan can ascertain what exactly is there that is divisible between the estate and the alternate payee.

Then, instead of providing a current account statement and their QDRO procedures document, the TPA decides, unbidden, to retain its own counsel to write a QDRO for the alternate payee (!), which, shocker, does not allocate the full components of the benefit, though nothing in the plan document prevents full allocation. (Of course, I would not allow my client to sign such an abomination.) Additionally, the cash balance TPA's benefit statement from several years ago (the only statement the estate has), is labeled for the sponsor's DC plan (the one administered by a different TPA), includes a single line item for the cash balance plan without identifying that plan as distinct from the entire rest of the statement. This is not a small-estate matter and there is likely 500k+ in the participant's hypothetical account.

In 30 years of practice, I have never seen a TPA screw up this badly. I'm counting the misrepresentations, fiduciary breaches, and prohibited transactions, and wondering when they'll stop shooting themselves in the foot before I sue their pants off, as they're not listening to reason. Thank the stars original poster Santo Gold has the wits to ask their learned colleagues here for their thoughts when unsure.