To remain competitive in today’s working environment employers will offer employees the opportunity to participate in a pre-tax retirement plan.  In addition, they may offer to match the employee’s contribution up to a certain percentage.  As part of the process, the employee is required to complete certain paperwork which includes a Beneficiary Designation Form (BDF).  This form directs the plan administrator as to who should receive the funds in your retirement plan upon your death.  This document takes priority over your will.

Just recently (March 2017) there was a case decided in Florida Federal District Court that addressed an improperly completed Beneficiary Designation Form.  The case, Ruiz vs. Publix Super Markets, was about a former employee who wanted to change her beneficiary designation.  The Plan had clear directions on how to complete the BDF.

The former employee called and was informed to make a change she would need to do the following:

She must write a letter. And in the letter, she must put the person she wants, with their social security number….That she must include her name, her Social Security number, cards if she can get ahold of them. The main thing was, they kept emphasizing that the most important part of the letter was to make sure she signed it and dated, that was a must.

The former employee was able to obtain a BDF but did not sign and date it.  Instead, she referenced the letter she had written. Publix did not process the request but sent it back because the BDF was not signed and dated.  The former employee died a day after she wrote the letter.

The funds were distributed to the original beneficiaries and the court agreed and ruled that the Plan’s requirements were not precisely followed.  The BDF was not signed and dated by her. The fact that there was a written letter that “substantially complies” did not matter.

Moral of the story…..“Follow Directions”.

You should periodically review your beneficiary designations on all retirement accounts including IRA’s and company plans. More importantly, you should look at your beneficiary designations when one of the following life changing events take place:

  • Marriage
  • Divorce
  • Birth or adoption of a child