Court Finds That Plan Document Trumps Beneficiary Designation Forms

Plan documents generally control all aspects of a qualified retirement plan. Whether the plan document invalidates the language in other forms, such as a written beneficiary designation form, can lead to confusion and conflict. Recently, the U.S. Court of Appeals for the Ninth Circuit had to resolve just such a case.

In Becker v. Mays-Williams, the plan participant designated his wife as his retirement plan beneficiary, but the couple later divorced. He then contacted the plan’s benefits call center and verbally replaced his former spouse with his son as the new beneficiary. However, he never completed and signed a written change of beneficiary form before he died.

Both the participant’s former wife and son sought benefits from the plan. . The plan administrator filed suit in the federal court to determine whom the proper beneficiary was. The court ruled in favor of the ex-wife on the basis of the deceased plan participant’s failure to complete a new written beneficiary form designating his son as the new beneficiary. The son appealed the decision of the district court. The case hinged on whether the beneficiary designation forms had the same legal authority as the plan document.

The plan document stated that unmarried plan participants could change the beneficiary designation occasionally, and the summary plan description stated that this could be achieved by visiting the plan’s website or calling the plan’s benefits center. It also stated that, upon the death of an unmarried participant, a valid beneficiary designation had to be on file with the benefits center, or the benefits would be paid out to the participant’s estate.

The court concluded that the plan participant had complied with the terms of the plan.  Further, the court concluded that the beneficiary designation forms weren’t themselves governing plan documents, and that a written change of beneficiary form for unmarried participants was not required. Thus, the phone call designating the son as the beneficiary was permissible, and the lower court’s ruling was overturned. The moral of the story: make sure your plan document and any corresponding forms do not contain contradictory language.

 

© 2015

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