Robert M. Richter, J.D., vice president at SunGard, on behalf of the ASPPA, shared concerns received from Society members about the topic with the Department of Labor’s Advisory Council on Employee Welfare and Pension Benefit Plans. Concerns included whether employers or plan providers are the best choice for handling the designation process, retaining forms and receiving updates when there has been a family change for the participant, educating participants about the beneficiary selection process and handling disputes about beneficiaries when a participant dies.
Richter cited best practices that could minimize these concerns. He said at a minimum, forms must conform to the statutory requirements for spousal consent to an alternate beneficiary: it must be written, the consent to a different beneficiary must be general or specific, there must be an explanation of the effect of the election, and the spouse's consent must be witnessed by a notary or plan representative.
There are a number of optional provisions that must be considered for inclusion in the designation forms:
- Plans should ensure there are enough details on beneficiaries and contingent beneficiaries so they can be easily identified and located. For example, asking for the relationship of the participant and beneficiary, the beneficiary’s social security number, or the beneficiary’s current contact information.
- Plans should decide whether to use provisions addressing contingencies (e.g., divorce revoking a designation in favor of an ex-spouse).
- It is also recommended that plans specify whether a designation is only valid upon the plan administrator’s “receipt” of the designation or upon “acceptance” of the designation.
Administration best practices suggested by Richter include educating participants about the plan’s default beneficiary provisions to potentially reduce the number of forms received, reviewing forms received to make sure they are complete, implementing a system for storage of designations so they can be located easily and issuing periodic reminders to participants to review their beneficiary designations.
Richter said there may be technology solutions that can be deployed to improve the processes. An electronic system for designating beneficiaries could ensure that all items are complete on a form before it can be submitted. Electronic storage would make it easy to retain and reproduce (even on demand) designations. In addition, current e-signature technology might help reduce claims of forgery. The ASPPA comments are available here.