401K distribution

Eliant

Can someone answer the following : " What does the law say regarding 401K distribution? Is the spouse required to give consent for distribution. Or is this a stipulation the employer places on the plan itself?

We had a situation were the employee was terminated, he completed the 401K distribution, he marked on there that he was single. We were deducting child support, we figured he was divorced so we processed all the paperwork. Our 401 plan administrator paid out the 401K. Wife is upset and coming after us, they are still married. Our plan was changed a few years ago, stating spousal consent is not required for 401K distribution.

NaeNae55

If I were you, I would contact my lawyer.

What does the beneficiary designation say? I am not positive, but I think that if you don't designate your spouse as the beneficiary, they have to sign off on it. I think that is not a plan choice, but rather the law. If the 401k beneficiary designates his wife, you may be in trouble.

What other paperwork do have that indicates the employee was single or married? I would check any other benefit forms this employee may have completed such as health insurance, life insurance, etc. If he always showed himself to you as single, then this may support you.

Not to take anything away from anyone on this forum, but again, I would talk to your ERISA attorney. Right away. Anyone else have any input?

LindaS

My understanding of the 401(k) regulations are the same as the previous post - I was always under the assumption that the spouse is the automatic beneficiary unless THEY "sign off" and this must be notarized on the form. As for the distribution, I don't know what the spouse would be able to use against either your company or the 401(k) adminstrator - he lied on the distribution form indicating that he was single so the problem lies with him. I know when our administrator processes distributions, they do not require a divorce decree because the responsibility lies in the participant.

I agree with the suggestion regarding speaking to the attorney but as long as your plan is in accordance with ERISA, you should be okay.

moneyman

I am in agreement with the above that if the spouse is not named as the 100% beneficiary, the spouse must consent to this, usually the signature is witnessed by the Plan Administrator or notarized. When it comes down to a distributuion, even on a rollover to an IRA, we had to have the spouse also sign that the money was even being moved to another account.

I don't know what the ERs responsibility is when the EE falsifies the records or how far and ER is expected to go to insure that they have the correct information. However, we have always asked for clarification when someone asks for a spouse to be removed from the health insurance (are they just dropping coverage or was there a divorce which sets off a COBRA event), or 401(k) forms that shows a designation different from a previously filed paper. We had one doctor who was in the middle of a divorce (which we had not heard of yet) who marked his paperwork as single and named a different beneficiary. As embarrassing as it was, I called and asked for his final divorce decree and explained that the reason I was asking was that we had not heard that he was divorced and a married participant needs to name the spouse or have the spouse sign off for NOT being named on the beneficiary form. He was very understanding and just figured that since it would be final "soon" he could change his status now. Well, we may have avoided the very same situation as above because a year and half later, he is still not divorced, but had rolled his money over and out of our plan. I don't know if by asking for clarification was considered an invasion of his privacy? or just good recordkeeping?

System

Just one clarification to the post above - the spouse needs to sign off if they are not receiving at least 50% of the funds as a beneficiary. So, a notarized signature is not required if spouse is receiving 50% or greater and another beneficiary is receiving the remaining amount.

I am also curious as to employer's responsibility when an employee falsifies the information on a form. Our practice and belief is that the liability is with the employee and I believe it even states it on the forms that they sign "all information is true and accurate" or something like that. So I don't know how the spouse could come after the employer.