Often when we are engrossed in the day-to-day operation of 401(k) plan management, we can overlook the reason why we are all doing this – for the benefit of our people. We also focus on the here and now; making sure that employee deferrals are contributed on time, that investments are top notch, and that participants are retirement ready. The one item that often get overlooked is what will happen when your hard-working people pass way. The simplest way to answer that question is to make certain all of your participants have an accurate beneficiary form on file with you, the plan sponsor, and if possible, the plan’s recordkeeper. Here are 5 items that can help you and your participants get back on track with their beneficiary forms.
1. Don’t leave a beneficiary form blank, and don’t name your estate as beneficiary.
Failing to name an individual, or individuals, as your beneficiary could deprive your heirs or loved ones of inheriting your retirement assets. Another downside of not naming a beneficiary – your retirement assets would need to go through the lengthy probate process and could be subject to creditors.
2. Make a beneficiary designation for each retirement account that you own.
People often make the mistake of assuming that the beneficiary they name on one account will dictate who the beneficiary is on their other retirement accounts, but that is not the case. You need to have a valid beneficiary on file for each account.
3. Remember that beneficiary designations take precedence over wills.
Retirement assets are distributed according to the named beneficiary, regardless of any other agreements, such as wills.
4. Keep your beneficiary designations current.
Many people fail to update their beneficiary designations after major life events, such as a marriage, divorce, or new addition to the family.
5. Consider consulting a professional.
You may wish to seek the guidance of an experienced attorney, CPA, or financial advisor to help you make the best choices for you and your heirs.
Don’t let your hard work or that of your participants go to waste by having their retirement account balances go to the wrong person or worse, the state. If you need assistance with making sure that your beneficiary forms are on file and in good order, please give me a call at 205-970-9088 or email me at firstname.lastname@example.org.