HOW TO LOSE YOUR RETIREMENT OPTIONS

Written By: Robert L. Buzzendore, Esquire
As Reviewed By: William F. Hoffmeyer, Esquire

A Will is beneficial because it provides guidance and direction on how to handle your personal property and/or real estate after your death. On the other hand, a Will does not handle items with a beneficiary such as a retirement plan or a life insurance policy unless you name your estate as beneficiary or you do not have a valid beneficiary under your policy or plan.

It is very important to know your retirement plan’s rules as it relates to your beneficiaries.  Otherwise, your desires under that plan may not be fulfilled and your intended beneficiaries may lose benefits. 

An unfortunate situation arose in the recently reported case of Estate of Wilson v. State Employees’ Retirement Board when the retiree attempted to modify his retirement option.  The State Employees’ Retirement Board (“SERS”) did not receive his signed form until after his death.  As a result, the Board denied his requested change and his daughters received nothing from his retirement.

Mr. Wilson began work with the Department of Public Welfare in 1977.  One of his employment benefits was a state pension.  The pension provided him with four options regarding distribution of benefits when he retired.  Option 1 would enable him to receive payments for his lifetime, and if he received less than a certain amount, his beneficiary would receive the difference. 

Option 2 would allow him to select a joint survivor annuity.  This option would pay him less on his monthly pension but when he would die, his beneficiary would receive payment for the remainder of the beneficiary’s life.

Mr. Wilson retired and he selected option 2, naming his wife as the joint survivor beneficiary.  This option would allow his wife to receive his pension benefit when he died.

His wife predeceased him.  SERS’ regulations required Mr. Wilson to name a new beneficiary in place of his wife.  In addition, he had to name someone before he died and the plan had to receive the form before he died.  If he did not comply with these requirements, his pension would terminate when he died. 

Mr. Wilson elected the option naming his daughters as beneficiaries.  He signed the form and mailed it by first class mail to SERS.

Mr. Wilson died on June 9.  SERS received the form on June 13.  On July 12, SERS received notice of Mr. Wilson’s death.  SERS then notified the beneficiaries that because it did not receive the form until after his death, no valid beneficiary had been named and no survivor benefit existed after he died.  Consequently, Mr. Wilson’s selection of beneficiaries on his form was invalid, and no benefit existed for his daughters.   

The beneficiaries challenged SERS’ decision claiming the date of mailing of the signed and completed form was sufficient to trigger the change in beneficiaries.  The Supreme Court rejected this argument and held the applicable law and regulations required SERS to receive the form before his death.

It is not only important to act when you need to change beneficiaries, but it is also important to comply with the plan’s requirements.  It is strongly recommended you review your Will, retirement plans, and life insurance policies to ensure they still reflect your desires, and if you need to change them, you should promptly act to effectuate your changes.  Hoffmeyer & Semmelman is available to assist you in drafting or revising a Will and reviewing your estate plans.

© Copyright by Hoffmeyer & Semmelman LLC, February 2020