EBIA Weekly Newsletter

Phone Calls to Change Beneficiary, Without Proof of Intent, Fail to Change Designation

   March 17, 2016

Becker v. Mays-Williams, 2016 WL 878492 (W.D. Wash. 2016)

In this case, a deceased participant’s former spouse and son each claimed death benefits under the participant’s employer-sponsored retirement plans. On three separate occasions, the plans’ call center received inquiries about changing the participant’s beneficiary designation from his former spouse to his son, and each time the plan administrator mailed paperwork requiring the participant’s signature to validate the change. Only after the third call was the paperwork returned, but without a signature; the plan administrator notified the participant in writing that the unsigned paperwork was not valid. The participant died without returning properly completed paperwork. The trial court entered judgment without trial for the former spouse, reasoning that the phone calls, without the signed paperwork, failed to change the designation. But on appeal the Ninth Circuit reversed and remanded the case for trial, concluding that nothing in the plan’s governing documents prevented an unmarried participant from designating a beneficiary by phone, and thus the phone calls could constitute substantial compliance with the plan’s procedures (see our Checkpoint article).

At trial, the court first noted that the son did not provide evidence that the participant, not someone else, made the calls to the plans’ call center. The argument that the participant intended to change the designation was further undermined by his repeated failure to properly complete and return the paperwork. And other evidence indicated that the participant might have not intended to change his designation from his former spouse to this son—the participant had named all nine of his children in his last will, had been estranged from this particular son for some time, and had an ongoing positive relationship with his former spouse. It was no more reasonable to conclude that the participant intended the change than to conclude that he did not make the calls and that, even if he was the caller, the failure to complete the paperwork indicated that he did not wish to make the change. The relevant state law of substantial compliance required the court to find that the participant intended to change the designation and had “done everything which was reasonably possible to make that change.” The court held that the evidence did not support such a finding and ruled in favor of the former spouse.

EBIA Comment: Both the nature of the noncompliance and the quality of evidence regarding the participant’s intent are relevant to finding substantial compliance. Courts are more likely to find substantial compliance when the evidence of a participant’s intent is provided by a disinterested party than when, as in this case, the individual trying to prove intent would benefit from the change. For more information, see EBIA’s 401(k) Plans manual at Section XII.C.4.b (“Claims of Substantial Compliance With a Plan’s Beneficiary Change Rules”) and EBIA’s ERISA Compliance manual at Section IX.L.1 (“Situations Where Competing Beneficiary Claims Can Arise”).

Contributing Editors: EBIA Staff.