Note this… Participants must follow the plan beneficiary designation procedures | Holland & Hart – The Benefits Dial
The principles governing how ERISA plans determine a participant’s beneficiary have not changed much since country singer George Strait sang “Write this down” in 1999. In short, the participant has to write it down … on the forms and following the procedures established by the plan.
Recently we have seen several examples of family members of deceased employees who are surprised by the plan file indicating who has been named as beneficiary. They attempted to argue that the deceased employee’s will should be allowed to designate a beneficiary, or that the plan should look to state laws regarding estates. However, the courts have made it clear that these foreign sources do not affect the plan process. (The most famous are the decision of the Supreme Court of the United States in 2001 Egelhoff decision, and its 2009 Kennedy v. DuPont decision.)
The only thing that matters is what the participant wrote. If the participant has been clear and has followed the plan’s procedures to designate a beneficiary, the plan trustees are required by ERISA to follow that outcome.
Of course, it goes without saying that the Trustees must first determine what the terms of the plan are. The language of the plan may have requirements or exceptions. For example, some regimes provide that a divorce automatically revokes a beneficiary designation that has already been filed. Any specific rules or exceptions found in the language of the plan must be strictly followed by the Trustees.
And in some cases, it can be difficult to determine whether the participant has followed the procedures of the plan. For example, the participant may have failed to sign a form or completed it incorrectly. In these situations, plan trustees may want to consider an interpleader – a special court process where funds go to court and a judge determines who is entitled to them.
To avoid misunderstandings or embarrassing or difficult situations, employers should communicate with employees early and often about their beneficiary designations. Get creative – consider offering a small bonus or prize to employees who confirm their beneficiaries. Send targeted communication to employees without a registered beneficiary or to employees who have recently divorced. In short, encourage employees to “write it down!” “