Articles Tagged with beneficiary

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Becker Williams, F. Supp. 3d     , 2016 WL 878492 (W.D. Wash. 2016)

Facts: Husband and wife were married in In 2002, the husband designated the wife as survivor beneficiary of his retirement plans with Xerox.

Husband and wife were divorced in 2006. In 2007, the employer received several telephone calls from a person claiming to be the husband, who said that he wanted to change the beneficiary to his son by a prior marriage. In response to these calls, the employer sent the husband three different copies of the written form necessary to complete the change. The first two forms were not returned; the third form was returned unsigned and undated.

When the husband died, both wife and son asserted claims to the survivor benefits, and the employer interpleaded the benefits into federal court. The trial court declined to allow summary judgment, and the Ninth Circuit affirmed, finding that a telephonic change of beneficiary was potentially enforceable, even without a writing, and that a it was a material issue of fact as to whether such a designation was actually made. Becker v. Williams, 777 F.3d 1035, 1042 (9th Cir. 2015). Upon remand, the district court held a trial and addressed the merits.

Issue: Who was entitled to the husband’s survivor benefits?

Answer to Issue: The wife

Summary of Rationale: Under Washington state law, to change a survivor beneficiary, an employee must substantially conform with the terms of the policy or “[S]ubstantial compliance with the terms of the policy means that the insured has not only manifested an intent to change beneficiaries, but has done everything which was reasonably possible to make that change.”   2016 WL 878492, at *2 (quoting Allen v. Abrahamson, 12 Wash. App. 103, 105, 529 P.2d 469, 470 (1974)).

The son did not meet his burden of proving substantial compliance. First, there was no evidence that the person who called to make the change of beneficiary was actually the husband. Second, the husband’s failure to return the first two forms and his failure to sign and date the third form suggest that his intention to change the beneficiary was not complete. In this regard, the court noted that the forms themselves stated that the change of beneficiary was not valid until the form was signed and returned. “[T]he failure to complete simple, mundane tasks undermines Asa Sr.’s alleged unequivocal desire to change his beneficiary.” Id. at *3.

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Carolyn Woodruff, J.D., C.P.A, C.V.A.

Patterson v. Chrysler Group, LLC, 845 F.3d 756 (6th Cir. 2017)

Facts: A divorce decree awarded the wife an interest in the husband’s retirement and survivor benefits, expressly ordering him not to elect a survivor beneficiary other than the wife. The wife did not obtain a QDRO.

Upon retirement, the husband elected to receive retirement benefits without survivor benefits, thereby violating this provision. The wife sought to enforce the decree by sending a copy to the plan. The plan refused to comply with the decree, finding that the decree did not meet the requirements for a QDRO.

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State Farm Life & Assurance Co. v. Goecks, F. Supp. 3d       , 2016 WL 1715205 (W.D. Wis. 2016)

Facts: A Wisconsin divorce decree provided:

The respondent [Gary] shall be required to maintain the petitioner [Sharon] as the primary, irrevocable beneficiary on one third of the face value of all his life insurance policies in effect as of the date of the final hearing or in the amount of Seventy Five Thousand Dollars ($75,000) of the face value of said policies, whichever sum is greater. Respondent shall provide the petitioner proof of said insurance and beneficiary designations. Petitioner shall pay the respondent the sum of Twenty Five Dollars ($25.00) per month toward the cost of said insurance. The parties further agree to designate the children as primary beneficiaries of all life insurance policies except as set forth above.  2016 WL 1715205, at *1. The divorce decree was not submitted to the employer for qualification as a QDRO.

The husband initially complied with the above provision, but later changed the beneficiary on some of his life insurance to his new wife. Upon his death, the insurers paid some of the benefits to the new wife, and interpleaded the remainder. Both wives asserted competing claims to the proceeds.

Of the various insurance policies at issue, one was an employer-provided policy regulated by ERISA.

Issue: Who is entitled to the proceeds from the employer-provided policy?

Answer to Issue: The husband’s wife at the time of his death.

Summary of Rationale: The court first held that the husband had breached the contract, rejecting a rather weak state law argument that the agreement only required the husband to name his former wife and children as a beneficiary of the insurance, and not as the exclusive beneficiary.

The employer-provided life insurance policy was part of a benefit plan, and it was therefore subject to ERISA. Benefits regulated by ERISA can be transferred only under terms of a QDRO. No QDRO was ever submitted. Thus, federal law preempted state law and barred enforcement of the decree with regard to the ERISA- regulated policy.

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Dahl Aerospace Employees’ Ret. Plan of Aerospace Corp., 122 F. Supp. 3d 453 (E.D. Va. 2015)

Facts: A Virginia divorce decree, incorporating a settlement agreement, gave each spouse the option to elect survivor benefits under the retirement plan of the other. This provision was not immediately stated in a DRO or qualified by the plan.

The husband’s pension plan allowed him, upon retirement, to elect a 50%, 75%, or 100% survivor benefit.

The husband retired on July 31, 2014, 11 years after the divorce decree. He did not notify his former wife in advance, or give her any option to elect survivor benefits. Instead, he elected his current wife as 50% survivor beneficiary. He stated in his election that no outstanding court order required him to name another person as survivor beneficiary—a blatantly false statement.

Upon learning of the husband’s retirement, the former wife’s counsel prepared a draft DRO requiring the husband’s employer to act as if the husband had elected 100% survivor benefits for his former wife. The retirement plan refused to qualify this order, on the grounds that the husband had already elected a 50% benefit for his current wife and he was only permitted to name one survivor beneficiary.

The former wife sued the plan and the husband in federal court, seeking a declaratory judgment that the husband’s election of his current wife as survivor beneficiary was void for fraud, and that the plan was required to qualify an appropriate DRO naming the former wife as survivor beneficiary. The plan and the husband moved to dismiss the wife’s action.

Issue: Should the wife’s action be dismissed?

Answer to Issue: Yes.

Summary of Rationale: The plan argued that the wife lacked standing, because she was not an actual plan  But a person with a claim to benefits is also entitled to sue the plan. The former wife had a colorable claim to benefits.

At the time the husband retired, there was no QDRO in effect limiting his choice of survivor beneficiary. Therefore, the former wife could prevail only by establishing that the husband’s survivor benefit election was void. She cited no case law holding that an election of survivor benefits is void if a false statement is made which defrauds a former spouse who has not yet obtained a QDRO. In the absence of such law, the court refused to hold that the survivor benefit election was void.

Because the former wife did not obtain a QDRO, the husband’s election of his current wife was enforceable under ERISA, even though the election violated a state court order.

Observations:

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I.R.C. § 414(p) and 29 U.S.C. § 1056

Morris v. Metropolitan Life Ins. Co., 751 F. Supp. 2d 955 (E.D. Mich. 2010)

(a) Facts: When the husband and the wife were divorced, the state court divorce decree extinguished all rights held by one in any life insurance of the other.  But the husband retained the wife as beneficiary of his employer-provided life insurance.  Upon his death, the plan paid the proceeds to the first wife, and the husband’s second wife sued to recovery the proceeds.

(b) Issue: Who is entitled to the proceeds?

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