Staying up to date on your participants’ beneficiary designations is likely not a top priority in your day-to-day activities as a plan administrator. However, by utilizing these three best practices, you can save yourself some time and some headache.
1. Periodically remind participants to update their beneficiary information
Some life events, such as marriage, divorce, childbirth, or adoption create non-plan documents that may seem to establish or change a right to benefits under a plan. However, as established by Kennedy v. Plan Adm’r for DuPont Sav. and Inv. Plan, 555 U.S. 285 (2009), these documents do not operate as a qualified domestic relations order (QDRO) or as a plan document, and therefore do not overrule established beneficiary designations. So, unless participants update their beneficiaries in accordance with plan documents or QDROs, you could be obligated to pay benefits to outdated beneficiaries.
2. Establish appropriate record-keeping practices
Protecting your employees’ private information is important. And while some businesses might choose to delete employee information that is over 5 years old, this could accidentally cause them to delete beneficiary designation forms that have not needed updating in those last 5 years. To avoid such mistakes, plan administrators should coordinate with their HR department to ensure the appropriate information and plan documents are retained, regardless of a business’s deletion policies.
3. Require proper identifying information for beneficiaries
Having accurate identifying information for your employees’ beneficiaries is crucial to ensure proper distribution of funds when necessary. Rather than simply having a name listed, it is helpful to also require contact information and/or relationship to the participant. While it requires more work on the front end, ensuring your participants’ beneficiary information is in order will help avoid administrative issues in the future.