Tips for Preventing Beneficiary Disputes and Liability
Upon the death of a participant, it’s important to determine the rightful beneficiaries based on the deceased participant’s current beneficiary designation. To prevent problems, here are some operational steps to consider:
1. Remind employees to update beneficiary designations periodically, particularly upon life-changing events.
2. Re-solicit updated designations from employees on a periodic basis.
3. Communicate a clear process for updating and changing beneficiary designations; then follow it consistently.
4. Review all submitted designations to ensure completeness, signatures, dates, and proper spousal consent if primary beneficiary is not the spouse.
5. Retain original, signed designations and all related correspondence in a secure physical or electronic location.
6. Adopt a plan document amendment which provides for the automatic revocation of a spousal designation upon the participant’s divorce from that spouse.