“We just received a request from our 403(b) plan recordkeeper for a Power of Attorney to be reviewed and approved by an authorized representative of the plan. It is for the daughter of one of our former employees, and the former employee does indeed have an account balance in the plan. Should we just review it for accuracy and approve it or have outside counsel for our retirement plan look at it?”
Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:
A Power of Attorney, or POA, is a written document or other record where someone (i.e., the principal) authorizes one or more individual(s) (i.e., the agent(s) or attorney(s)-in-fact) to act on behalf of the principal regarding financial or other property matters, such as retirement plan matters, tax matters or general business matters. A POA is often used when a participant has become incapacitated or has otherwise determined he or she needs to empower another individual to act on his or her behalf.
A request to review POAs for plan participants who wish to delegate to an agent authority over their retirement plan matters is not uncommon for plan sponsors, but the process can create administrative issues. Since a POA is a legal instrument under state law, someone needs to determine that the POA is valid under state law, where the requirements vary from state to state; presuming your recordkeeper does not offer that service, then it would indeed make sense for your outside retirement plan counsel to review.
Some other potential issues should be mentioned as well. First, someone should verify that the participant is not deceased, since durable powers of attorney expire upon a participant’s death. Even if the POA does not appear to be suspicious on its face, plan sponsors can’t be too careful and must ensure that the document’s pages are in order and that identity verification procedures are followed. Also, if the agent—the participant’s daughter in this case—is not the sole named beneficiary for this participant’s account, you should inquire of counsel if you need to inform the named beneficiary or beneficiaries of the POA, since the POA could affect their rights as beneficiaries to the participant’s death benefit.
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.
Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.
« 2022 HSA Conference: Creating the Optimal Plan Design