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Monday, June 18, 2012
by Stefanie S. Trilling
Practitioners encouraged the Department of Labor June 14 to
adopt a safe harbor standard that offers liability protection to plan
fiduciaries with respect to beneficiary determinations. Witnesses testified
during an ERISA Advisory Council meeting on current challenges and best
practices concerning beneficiary designations in retirement and life insurance
Kathy Callaghan, senior manager in MetLife’s Group Life
Products unit, suggested DOL adopt a “safe harbor standard that offers
fiduciary liability protection to plan sponsors, plan administrators, and plan
recordkeepers with respect to beneficiary determinations.” In addition to
protecting the plan fiduciaries, she said, a safe harbor “will ensure the
intent of the beneficiary is realized.”
Participants who have made a beneficiary designation often
do not revisit the designation after a life-changing event, such as divorce,
said Robert M. Richter, a vice president at SunGard who also testified at the
Having an automatic designation on file would eliminate
confusion in cases in which participants do not change their beneficiary, said
Richter, who also serves as the president of the American Society of Pension
Professionals and Actuaries.
Currently, between 15 percent and 40 percent of all
beneficiary designations fail due to mathematical errors, failure to sign, or
failure to date. Requiring “miminum contact information for beneficiary
designations” would be “very helpful in identifying a beneficiary or
determining whether a beneficiary predeceased the participant,” Callaghan said.
“We also suggest the safe harbor standards provide a life
event checklist” to all plan participants, whether requested or not, that would
replace previous beneficiary directions if completed properly and returned to
the plan, she said.
to post a comment.
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