The Council examined current issues surrounding beneficiary designations in retirement and life insurance plans to determine entitlement to benefits payable upon death of the participant. This process included examining the issues that may arise when there is a question about whether the beneficiary designation accurately reflects the participant’s intent and resulting disputes over who is entitled to Employee Retirement Income Security Act (ERISA) plan benefits following the death of the participant. These issues range from the failure to change a beneficiary designation after divorce, incorrectly completed beneficiary designation forms, forms that are inconsistent with plan terms and “stale” designations which have not been updated to reflect changed life circumstances.
The Council’s examination paid special attention to plan provisions and administrative practices that could avoid beneficiary designation disputes and ensure that the participant’s intent is effectuated. In addition, the Council assessed whether participants know when they should consider changing their beneficiary designation and/or the steps that they must take in order to make these changes, as well as plan communications to notify participants of the necessity of these changes.
As a result of its research, the Council recommended the DOL:
- Develop educational materials to help plan participants understand the importance of beneficiary designations, how they work and the importance of updating them when certain life events occur;
- Develop suggestions and guidance for employers, plan administrators and service providers about how to improve plan design and administrative practices to diminish disputes in the area of payments based on beneficiary designations; and
- Issue guidance for plans, plan administrators and plan fiduciaries regarding beneficiary designation disputes.
The ERISA Advisory Council’s report is here.
« CalPERS Approves Plan to Improve Funding