A Beneficiary Form is the Most Important Benefits Form – Employee Benefits and Compensation


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The most important form in all of the benefits is an employee’s individual life insurance and/or 401(k) beneficiary(ies) form(s). In the absence of a valid beneficiary form on file with the plan administrator, life insurance and 401(k) plan documents often control the distribution of plan proceeds upon the death of an employee. . Unfortunately, the various distribution protocols outlined in the various life insurance and 401(k) plan provider documents are often contrary to what one would expect from the distribution protocol, which may require me to advise a plan to pay the proceeds to an unintentional person. individual (for example, a former spouse) or to the estate of the deceased employee. In other words, distributing large sums of money could potentially go against the wishes of the deceased employee. The best way to avoid this problem is to ensure that an employee’s life insurance and 401(k) beneficiary form(s) exist, are up-to-date, and match all estate planning.

Below are two very common scenarios with possible unwanted beneficiaries:

  1. 401(k) plan: An employee divorces and names an adult child his new beneficiary. The employee later remarries and dies without updating their beneficiary form. By law, the new spouse is automatically the beneficiary of the balance in the employee’s 401(k) account. For the adult child to retain a right to all or part of the 401(k) plan account balance, the employee would have had to complete a new beneficiary form (after the marriage) and their new spouse would have to consent to a partial transfer. or full balance of the account to the adult child or any other desired beneficiary (trust, college, etc.). An employee’s spouse is always the sole beneficiary of the employee unless the spouse consents to name another person or entity as beneficiary. This consent must be given in writing and filed in the manner set out in the plan documents.

  2. Estate planning: An employee hires a lawyer who prepares a will, trust and power of attorney for health care. The will and trust documents clearly name the trust as the beneficiary of the life insurance and 401(k) plan proceeds. The employee never updates the beneficiary form(s) on file with the life insurance plan or 401(k) plan. The employee dies later. Although the will and trust documents describe the trust as the beneficiary of the life insurance proceeds and 401(k) account balance, the beneficiary forms filed with the individual plans will govern any distributions on death. ‘an employee. If there are no valid beneficiary forms on file, the plan document(s) will provide for the proper distribution of plan proceeds. Although the deceased employee’s family will often argue that the deceased employee’s will and estate planning documents are the clearest expressions of the deceased employee’s intent and that the plan(s) should follow the intent of the deceased employee, will and/or trust documents do not supersede beneficiary form(s) filed with life insurance plan or 401(k) plan and/or or the plan document(s) itself. Therefore, when engaging in estate planning activities, be sure to update all beneficiary forms to ensure they match the will and trust documents.

To avoid disputes and potential litigation, we recommend that all beneficiary forms be reviewed and updated at least annually and after any change in life events (birth, marriage, divorce, death of a beneficiary, etc.). The best way for an employee to express their wishes is to ensure that an updated beneficiary form is on file with all employer-sponsored (and individual) life insurance plans and the 401(k) plan. (k) whether any other person or entity other than the employee’s spouse is the intended beneficiary.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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