Beneficiary payouts from either retirement or life insurance plans can get sticky.
A new report by the 2012 ERISA Advisory Council looked at the challenges and best practices concerning beneficiary designations, focusing on steps that plans and service providers can take to ensure the proper beneficiary receives the intended benefit payment from the plan.
The council also examined issues and concerns regarding resolution of disputes regarding beneficiary designations.
The council recommended that the U.S. Department of Labor develop educational materials to help plan participants understand the importance of their beneficiary designations, how they work and the importance of updating them when life events occur.
It also recommended the DOL develop suggestions and guidance for employers, plan administrators and service providers on how to improve plan design and administrative practices to diminish disputes in the area of payments based on beneficiary designations, and issue guidance for plans, plan administrators and plan fiduciaries in several areas that would aid in the resolution of beneficiary disputes.
Many times, plan participants fail to make changes to their beneficiaries when they experience a life change like divorce or having children. The council looked at whether participants know when they should consider changing their beneficiary designation and the steps they must take to make these changes, as well as plan communications to notify participants of the necessity of these changes.