Compliance July 2, 2010

Beneficiary Choice Driven by Change Form Signing

July 2, 2010 (PLANSPONSOR.com) – A now-deceased life insurance plan participant effectively changed his beneficiary designation from his ex-spouse to his new wife when he and the second wife signed a beneficiary designation change form. 
Reported by

That was the bottom line of a ruling by the 11th U.S. Circuit Court of Appeals in a dispute between Alice H. Smith and Alma Sue Smith over the proceeds of Richard Smith’s life insurance policy. 

The appellate court ruled that an award of benefits under an Employee Retirement Income Security Act (ERISA) plan is governed by the plan language itself.  The plan document from Principal Life Insurance Co  for Richard Smith stated that a policyholder could “change a named beneficiary by sending a written request to The Principal,” and that once Principal recorded the change, that change applied as of the date the request was signed. 

The court ruled that Alice Smith was the beneficiary as of February 2007, when she and Richard Smith signed the form. 

The U.S. District Court for the Northern District of Alabama had ruled for Alice Smith and Alma Smith appealed.  Alma Smith argued, among other things, that she was entitled to the insurance proceeds because she was the beneficiary on Principal’s records at the time of Richard Smith’s death. 

The case is Principal Life Insurance Co. v. Smith, 11th Cir., No. 10-10122. 

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