Beneficiaries of employer-sponsored retirement plan accounts often find themselves in disputes with each other as to whom is really entitled to the 401(k) or profit sharing plan account balance when the participant dies. Most often, a surviving spouse finds him or herself battling with children from a prior marriage of the deceased spouse. The question both want answered is: what does it take for a surviving spouse to consent to waiving any interest in the benefits? Just such a question came up recently in Chicago before the Court of Appeals for the Seventh Circuit. See Burns v. Orthotek, Inc., Employees’ Pension Plan and Trust, No. 10-1521 (7th Cir. Sept. 15, 2001).
In Burns, Dr. Burns was the owner of an orthodontics practice, and the practice sponsored a pension plan, of which Dr. Burns was the plan administrator, named fiduciary, and main plan participant. He died in 2004, but his second wife, Cheryl, survived him. Before his death, Dr. and Cheryl Burns signed three plan documents: Dr. Burns’ waiver of a joint and survivor annuity with spousal consent, designation as beneficiaries Dr. Burns’ two sons, and Cheryl Burns’ consent to the beneficiary designations. After Dr. Burns died, however, Cheryl claimed survivor benefits under the plan. She argued that while she did sign a consent form to the waiver of the joint and survivor annuity and signed the consent to the sons being beneficiaries, the forms did not comply with ERISA’s requirement that her signature be witnessed by a plan representative in accordance with ERISA § 205.
That section of ERISA requires that any pension benefit payable in the form of a life annuity must provide for a joint and survivor benefit, and if the participant is married, that form of payment can only be waived if (1) the spouse consents in writing, (2) the election designates a beneficiary, and (3) the spousal consent acknowledges the election and is witnessed by a plan representative. In the Burns case, Cheryl contended that though she signed the consent, it was not witnessed by a plan representative because Dr. Burns did not sign the form as a witness.
The Court of Appeals appeared to weigh the equities of the case here, and held that the “witnessed” requirement did not require that the plan representative actually sign the documents as a witness. Dr. Burns was a plan representative, and signed the forms himself, and admittedly he provided the forms to Cheryl.
If you are a surviving spouse or a beneficiary and have questions about the validity of a spousal consent to designate an alternative beneficiary, talk to an ERISA lawyer.
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