POA to distribute to contingent beneficiary

A participant passed away, and the most recent beneficiary form shows his mother as primary beneficiary and sister as contingent beneficiary.  We have confirmed that there are no spouses, children, or anyone else in the picture.  Mother is in an elder-care facility with dementia, and Sister has a POA "for all financial matters" - we've asked for a copy of the POA to confirm.

What's the right direction here? Let's assume that the POA does say what we're told it says.  I assume we can then take direction directly from Sister and distribute however she completes the forms?

Is there any particular language that I should be looking for on the POA?  I understand that this might be attorney-time, but if I can facilitate this somehow, I'd like to help.

Thanks.

If a plan’s administrator recognizes an agent’s authority to submit the primary beneficiary’s claim and approves the claim, the plan pays the distribution to the primary beneficiary. (The agent would deposit the payment into a bank account the agent set up for her principal’s money.)

A starting point is, as many BenefitsLink neighbors remind us, RTFD—Read The Fabulous Documents.

A plan’s administrator might recognize an agent’s authority to submit her principal’s claim if the plan allows (or at least does not preclude) recognizing the beneficiary’s power of attorney, and the plan’s administrator finds that the power grants the might-be agent authority to do the thing she asks to do.

An ERISA-governed plan may (but need not) state provisions for recognizing or refusing an act carried out by a person’s agent. Likewise, a plan may (but need not) state provisions about how the plan’s administrator decides whether it will recognize a person’s power-of-attorney document as sufficient for the administrator to recognize the agent and the agent’s authority. If not inconsistent with the plan, a plan’s administrator may adopt written procedures to guide its exercise of discretion.

Unless the plan provides otherwise, ERISA alone does not require a plan to recognize a power of attorney or other agency. See, e.g., United Refining Co. Incentive Sav. Plan for Hourly Emp. v. Morrison, No. 1:12-cv-238, 2013 U.S. Dist. LEXIS 166186, 2013 WL 6147672, at *17 (W.D. Pa. Nov. 22, 2013) (“In order to honor Morrison’s beneficiary designation, the Plan Administrator would be required to determine the meaning and validity of the [power of attorney], which is an exercise explicitly rejected by the court in Kennedy.”).

Some administrators interpret plan documents’ silence about recognizing a power of attorney and other provisions that grant discretionary authority as allowing an administrator to recognize or refuse an agent. Discretion must be exercised with loyalty, impartiality, and prudence.

Even when an ERISA-governed plan’s administrator recognizes a person appointed an agent, the plan’s governing documents and ERISA govern the meaning and effect of the agency regarding the plan, including whether the agent has or lacks authority to do the thing the agent would seek to do. See, e.g., Taylor v. Kemper Fin. Servs. Co., No. 98 C 0929, 1999 U.S. Dist. LEXIS 14989, 1999 WL 78207 (N.D. Ill. Sep. 24, 1999); Pension Comm. Heileman-Baltimore Loc. 1010 IBT Pension Plan v. Bullinger, No. 1:92 Civ. 00204, 16 Empl. Benefits Cas. (BL) 1024, 1992 U.S. Dist. LEXIS 17325 (D. Md. Oct. 29, 1992); Clouse v. Philadelphia, Bethlehem & New England R.R. Co., 787 F. Supp. 93 (E.D. Pa. 1992); see also In re Shafer, No. 2:13-cv-00405, 2014 U.S. Dist. LEXIS 156622, 2014 WL 5599064 (S.D. Ind. Nov. 4, 2014).

With ERISA’s supersedure of States’ laws, a plan’s administrator may interpret a power-of-attorney document in ways that need not follow any particular State’s law. But many fiduciaries consider the meaning and effect of a power-of-attorney document under a relevant State’s law.

If a plan’s administrator recognizes an agent’s authority to submit the beneficiary’s claim and approves the claim, the plan pays the distribution to the named beneficiary. (The agent would deposit the payment into a bank account the agent set up for her principal’s money.)

A plan would not pay a contingent beneficiary unless the primary beneficiary is dead, or disclaimed, which seems unlikely if the might-be disclaimant has diminished capacity.

Even if a plan allows a beneficiary’s disclaimer and might allow a beneficiary’s agent to disclaim, an attempted disclaimer might not be an I.R.C. § 2518 qualified disclaimer, which many plans require, or might be invalid as a fraud on creditors.

And at least one court has interpreted that unless a plan states that a power to disclaim can be exercised by a beneficiary’s agent, only the beneficiary personally may exercise the power to disclaim. R. Scott Nickel, as Plan Benefit Adm’r of the Thrift Plan of Phillips Petroleum Co. v. Estate of Lurline Estes, 122 F.3d 294, Pension Plan Guide (CCH) ¶ 23937U (5th Cir. 1997).

A fiduciary might consider whether ERISA’s exclusive-purpose loyalty and prudence call the fiduciary to take steps to protect a beneficiary.

AlbanyConsultant, you might help the plan’s administrator use its lawyer’s time efficiently by collecting the documents governing the plan and relevant procedures, and noting provisions that might matter for the analysis.

And if the plan’s recordkeeper or third-party administrator has procedures about recognizing or refusing a power of attorney, those procedures might aid the plan administrator’s decision-making.

This is not advice to anyone.

4 hours ago, Peter Gulia said:

An ERISA-governed plan may (but need not) state provisions for recognizing or refusing an act carried out by a person’s agent. Likewise, a plan may (but need not) state provisions about how the plan’s administrator decides whether it will recognize a person’s power-of-attorney document as sufficient for the administrator to recognize the agent and the agent’s authority. If not inconsistent with the plan, a plan’s administrator may adopt written procedures to guide its exercise of discretion.

...

With ERISA’s supersedure of States’ laws, a plan’s administrator may interpret a power-of-attorney document in ways that need not follow any particular State’s law. But many fiduciaries consider the meaning and effect of a power-of-attorney document under a relevant State’s law.  

@Peter Gulia, I have recently learned, due to my own POA status, that some states (including my own NC) limit any POA document by requiring the POA to explicitly state the agent is permitted to do certain things; if not explicitly included, then such action is forbidden.  Example1, the agent may not change an existing beneficiary designation unless the POA document expressly grants such authority.  Example2, the agent may not delegate his/her POA authority unless the POA document expressly grants such authority. Does your statement above posit that a plan/PA may accept a POA document issued under a state statute without determining if any state POA limitations apply?

Many States’ laws governing a personal power of attorney (rather than a power coupled to a business stake or position) include clear-statement or “are you sure you mean to provide that” rules. Many restrict gifts, or a gift more than a specified amount. Some restrain a power to make one’s principal’s beneficiary designation, or otherwise to change beneficial interests.

Even when an ERISA-governed plan’s administrator is unconstrained by a State’s law, an administrator still must read the power-of-attorney document, and must construe and interpret the document’s effect and meaning.

To do so, an administrator might interpret the effect and meaning of a document and the powers it grants by looking—at least for some aspects—to the State law the document specifies as the power’s governing law. Or, if the document has no choice-of-law clause, the law of the place where the document was made. (Often, that’s knowable the principal’s acknowledgment or the notary’s certificate.) Construing and interpreting a document in accordance with the law the document’s maker at least impliedly assumed as relevant regarding the document seems a logical way to discern what powers the principal granted or omitted.

Using North Carolina law as an illustration, the statute enumerates ten things an agent is not empowered to do unless the power-of-attorney document “expressly grants” the power. N.C. Gen. Stat. § 32C-2-201(a), https://www.ncleg.gov/EnactedLegislation/Statutes/PDF/ByChapter/Chapter_32C.pdf.

Using AlbanyConsultant’s story, if the participant’s sister presented as the primary beneficiary’s power-of-attorney document one made following North Carolina’s statutory short-form power of attorney and the principal had not initialed the line for “Disclaim or refuse an interest in property”, a plan’s administrator might find that the agent lacks power to disclaim the primary beneficiary’s benefit.

Even if an agent generally has a power to disclaim, an ERISA-governed plan’s administrator might refuse a disclaimer unless the agent can show that the disclaimer is in the principal’s best interest, is not a fraud on any creditor or healthcare-financing regime, and does not involve the agent’s self-dealing (even if the principal had expressly authorized the self-dealing).

The situation AlbanyConsultant describes might be untroubled by any of those issues. Rather, an agent might submit the primary beneficiary’s claim, and would deposit the retirement plan’s payment to the primary beneficiary into a bank account the agent set up for her principal’s money.

This is not advice to anyone.

As reflected in @Peter Gulia posts, whether a plan can or should accept a POA is not at all clear.  There is definitely no requirement under ERISA to accept a POA and there is split views on what can be permitted even if the POA is accepted.  The conservative view (which I usually adhere to) is that unless the plan's governing documents state that a POA will be accepted, it won't be... and most, if not all, of the plans we deal with do not address them.  We do, however, often suggest and include in plans we work provisions that may permit benefits to be paid on behalf of physically or mentally incapacitated participant.  Perhaps look to see if your plan has a provision of that type.  For example, we recently assisted with payments under a POA, not due to the POA itself, but because that person qualified as a person who could receive that benefit under the plan's incapacity provision.   Here is their provision:

Quote

If any benefit is payable to a minor or an incompetent or to a person otherwise under a legal disability, or who, in the sole discretion of the Administrative Committee, is by reason of advanced age, illness, or other physical or mental incapacity incapable of handling and disposing of his or her property, or otherwise is in such position or condition that the Administrative Committee believes that he or she could not utilize the benefit for his or her support or welfare, the Administrative Committee shall have discretion to apply the whole or any part of such benefit directly to the care, comfort, maintenance, support, education, or use of such person, or pay the whole or any part of such benefit to the parent of such person, the guardian, committee, conservator, or other legal representative, wherever appointed, of such person, the person with whom such person is residing, or to any other person having the care and control of such person.  The receipt by any such person to whom any such payment on behalf of any Participant or Beneficiary is made shall be a sufficient discharge therefor.

Even in this case, there is essentially totally in the Committee's discretion to provide benefits.  In the instance, we concluded that "it would be reasonable for the Committee to determine" this paragraph fits we insisted on the POA providing quite a bit of documentation including driver's licenses or official ID of participant and agent, electric, sewage, utility bills showing residence address, the POA, signed letter from physician supporting disability claim, any SSA determination, any LTD determination, affidavits from POA, children of POA, release/hold harmless/indemnity from POA and children of POA, affidavits from supervising manager of participant.  Also, we requested and received a HIPAA Privacy Authorization because we called the physician to confirm the facts i their letter.  Like your case, part of the affiants' and the doctor's statements stated that the participant was in some type or nursing home.

Even after the Committee determined that it would make payments under this provision, the recordkeeper was directed that the agent could not change the beneficiary and distributions could be made only an account held solely in the participant's name, an IRA fbo participant, or another qualified plan account in the participant's name.  I believe the account was transferred in part to the participant's bank account and the remainder an IRA fbo participant.  Our view was that if the POA is valid (it met all of the requirements of the state in which they resided..PA, which was amended sometime in the 2000s to add the requirements of specific direction), the agent would have access to the bank account (which they did). 

There was a little less fear here since the agent was the spousal primary beneficiary.  However, we had the children, the contingent beneficiaries, sign releases in the event the spouse primary beneficiary died before the participant (the participant was 71 and the spouse was 74).  Alot of time was spent on this but the participant did have around $4M in the account.  Last but not least, a substantial file was built on this process and is being retained by the plan just in case.

Whether a plan’s administrator recognizes or refuses an agent, and for which kinds of acts, can be clear if the documents governing the plan and written procedures make it clear.

Some plan sponsors prefer that a plan grant its administrator wide discretion. Some prefer that a plan grant its administrator only constrained discretion, or almost no discretion. Which of those ways a plan sponsor prefers might vary with a particular plan’s surrounding facts and circumstances.

For the situation AlbanyConsultant describes, the plan’s administrator might be burdened by the documents the plan sponsor wrote.