Beneficiary Rights and Retirement Plans – Pay Attention to the Details!

In this prior post, we addressed what a Will does and does not do, and the fact that one of the things it generally does not do is control the manner in which retirement benefits are distributed upon a participant’s death.   Rather, those assets are typically controlled by the beneficiary designation that is completed by the participant.   A recent case decided by a U.S. District Court in Florida, Arlene Ruiz v. Publix Super Markets, Inc., highlights the importance to beneficiaries of not only keeping Wills up to-date, but making sure that beneficiary designations are as well and that there is strict compliance with the employer or plan administrator’s requirements for making those designations.

Irialeth Rizo was employed by Publix Supermarkets.  She was a participant in the Publix Employee Stock Ownership Plan (“ESOP”) and 401(k) Plan.  In October 2008, she designated her nieces and nephew as the beneficiaries of her ESOP and 401(k).  She was subsequently diagnosed with cancer, and on the day before she passed away, she and Arlene Ruiz (with whom, according to the court’s decision, she was in a long-term committed relationship), contacted Publix to inquire as to how she could change her beneficiary designations.  While the Publix Plan documents were very clear that all change of beneficiary designations must be submitted on Publix “Beneficiary Designation Cards”, the representative told Rizo that all she needed to do was write them a letter, indicating that the Beneficiary Designation Cards were not important because Rizo was not an active employee at the time.

Rizo sent Publix a letter (dictated by her and transcribed by Ruiz) which clearly indicated that she wanted to designate Ruiz as her beneficiary.  She included completed Beneficiary Designation Cards as well, but did not sign and date them.  Publix rejected the change of beneficiary designation because the Beneficiary Designation Cards were not signed and dated, effectively ignoring the signed letter which accompanied them.

Ruiz argued that Rizo substantially complied with Publix’s requirements to change the beneficiary and therefore the combination of the letter and unsigned Beneficiary Designation Cards should be given effect.  The court acknowledged that Rizo’s intent to designate Ruiz as her beneficiary was clear, but nevertheless ruled that the designation was ineffective because it did not completely comply with the provisions of the Plan.

What makes the result in the Ruiz case seem particularly unfair is that, as discussed in a prior post (see above), the trend in New Jersey and some other states is away from strict compliance with the requirements for Wills, with state legislatures and courts more focused on ensuring that the decedent’s true intentions are carried out.  Nevertheless, unless and until there is federal law to relax the need to strictly comply with Employer or Plan Administrator requirements for retirement plan designations, the message is clear:  pay attention to the details!

If you have any questions about this post or any other matters, please contact me at jjcostellojr@nmmlaw.com.