ERISA Advisory Council Roundup: Beneficiary Designation Safe Harbor


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 plans.

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 meeting.

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.