Can a Plan Participant Name a Charity as Beneficiary?

Q: My organization is a 501(c)(3) charity that sponsors a 403(b) plan. A participant has asked if he can name our organization as a beneficiary of his account. Is this possible?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: While the Internal Revenue Code permits participants to name any qualified 501(c)(3) charity as a beneficiary of their 403(b) or 401(k) plan account, including the charity they work for, your specific plan document is likely to be more restrictive.

First, many plan documents do not permit a participant to name a non-person as a beneficiary (with the exception of certain trusts.)

Second, even if your plan does permit a participant to name a charity as a beneficiary, many plans require that a death benefit be paid to a participant’s surviving spouse, if they are married (unless the spouse consents otherwise.) As 403(b) plans sponsored by charities are generally subject to the Employee Retirement Income Security Act, the participant would—if married—likely need to obtain the consent of their spouse to designate your organization as their beneficiary.

These rules could also apply to non-ERISA plans (e.g., church or governmental 403(b) plans), depending on the terms of the plan document.

In short, while it is technically possible for the participant to name your organization as a beneficiary, this option may be precluded by the terms of your plan document.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.