Beneficiary determined by plan document, not designation form

Sometimes conflicting beneficiary designations for 401(k) plan assets can be tough to sort out when a plan participant dies. It took a verdict from the U.S. Circuit Court of Appeals for the 9^th Circuit to resolve one such case, and the ruling may provide useful guidance for benefits administrators going forward.

The case, Becker v. Mays-Williams (13-35069-cv, 2015 WL 348872), centered around whether a beneficiary’s call to a benefits processing center could supersede his prior written instructions on a beneficiary designation form. The short answer is “yes,” but the particular facts in the case hold the key.

The plan participant, Asa Williams, a longtime employee of Xerox Corp., had originally designated his wife, Carmen Mays-Williams, as his beneficiary on the plan’s beneficiary designation form. Years later, however, the couple divorced. Soon thereafter Williams phoned the “Xerox Benefit Center” and asked to switch beneficiaries, naming his son, Asa Jr., from a previous marriage instead. That office acknowledged the request by sending him a letter with a form requesting written confirmation of the switch. Williams never did so.

When Williams died, both his son and ex-wife asked that the plan assets be distributed to them. The ex-wife stressed that the deceased had never sent in the form confirming the beneficiary designation change, arguing that the original form that had been filed was tantamount to a controlling plan document.

Also see: Step-children are not beneficiaries (unless they are)

The plan administrator didn’t know how to handle the competing requests, and asked the local federal district court in Seattle to provide direction. That court sided with the deceased beneficiary’s ex-wife. Asa Jr. appealed.

Language in the Xerox Retirement Income Guarantee Plan SPD states that a participant “may visit the Your Benefits Resources web site … or call the Xerox Benefits Center… to complete or change [his] beneficiary designation at any time.”

Another section of the SPD states that upon the death of an unmarried participant, “a valid beneficiary designation must be on file with the Xerox Benefits Resource Center prior to … death.” Otherwise, Xerox would disburse benefits to the deceased participant’s estate.

ERISA requires that fiduciaries distribute benefits “in accordance with the plan documents and instruments governing the plan.” The district court considered the beneficiary designation form to constitute a “plan document,” leading to its conclusion that the ex-wife was entitled to the benefits. 

Also see: When is ERISA preemption permitted?

Relying on some of its earlier rulings, however, the appeals court concluded that form not to be a “plan document.” A plan document, according to that court’s opinion, is one “that provides individual participants with information about the plan and benefits” or explains “exactly where [the participant] stands with respect to the plan – what benefits he may be entitled to, what circumstances may preclude him from obtaining benefits, what procedures he must follow to obtain benefits.”

Reasoning that the beneficiary designation forms “provided no such information” but simply served to “confirm the participant’s attempt to change his designated beneficiary,” the forms are not “plan documents” and therefore do not govern “the administrator’s award of plan benefits.”

Richard Stolz is a freelance writer based in Rockville, Maryland.