Court Says Call Center Communication Didn’t Change Beneficiary Designation

A recent ruling reminds us of the importance of ensuring that plan beneficiary designations are up to date — and that plans should have a documented procedure for how such changes are to take place.

In the case of Becker v. Mays-Williams, 2016 WL 878492 (W.D. Wash. 2016), an employee of Xerox Corporation designated his wife as his beneficiary on the Xerox plans’ written beneficiary designation form. However, following his divorce, he attempted to change his designated beneficiary from his ex-wife to his son, calling Xerox on three different occasions stating his desire to change his beneficiary designation to his son. Following each call, Xerox sent the participant beneficiary designation forms, but the participant never returned the forms – until after the third call, when the forms were returned – but not signed.

Following the participant’s death, both his son and his ex-wife sought benefits under the Xerox plans, and the plan fiduciary went to court to seek a determination on the proper beneficiary.

Previous Decisions

The district court found that the ex-wife was entitled to the benefit because the beneficiary designation forms were plan documents. However, on appeal, the Ninth Circuit reversed the district court’s decision, determining that the beneficiary designation forms were not plan documents because they did not contain information about the participant’s benefit entitlement, going on to note that the terms of the Xerox plan did not incorporate the beneficiary designation forms by reference.

The Ninth Circuit concluded that the participant had substantially complied with the terms of the Xerox plans because the plan documents did not require the use of a beneficiary designation form to change a beneficiary designation. Both Summary Plan Descriptions (SPDs) provided that a participant could visit the benefits website or call the Xerox Benefits Center to complete beneficiary designations, and based on the language of the Xerox plans, the Ninth Circuit found that the plan documents permitted unmarried participants to change their beneficiary designations by telephone.

Current Decision

In the most recent adjudication, in the United States District Court, W.D. Washington, in Tacoma, the court noted that the plans failed to provide any mechanism for how such a change may or should be made. “Put another way, the governing plan documents are so equivocal that unmarried participants could change their beneficiaries by email, carrier pigeon, messages in a bottle, or any other form of communication.” Lacking this specificity, the court noted that Washington courts follow the guidance set forth by the Washington Supreme Court in Williams v. Bank of California, requiring “…substantial compliance with the policy terms in effectuating a change of beneficiary,” which it said meant that the “insured has not only manifested an intent to change beneficiaries, but has done everything which was reasonably possible to make that change.”

The court noted that the son did not provide evidence that it was the participant, and not someone else, made the calls to the plans’ call center. Moreover, it said that the argument that the participant intended to change the designation was further undermined by the repeated failure to properly complete and return the paperwork (the court noted that during the period in question he regularly responded and signed documents as requested, including requests from his attorney). Additionally, the court found that the participant had not only maintained a good relationship with his ex-wife, it also cited evidence that he had been estranged from this particular son for some time.

Ultimately, the court found that the now deceased participant’s “…repeated failures over the course of four years evidences an intent not to fully and finally change his beneficiary designations,” and ruled in favor of the ex-wife, holding that the beneficiary designation controlled.

Add Your Comments

2 Comments

  1. url url'>Evan Barnard
    Posted March 21, 2016 at 12:01 pm | Permalink

    I would say that the headline is misleading regarding the actual content of the court decision. It sounds like the plan document was non-specific enough that a call center request WOULD have been acceptable, and that the issue of the son not proving it was the participant who made the calls was why they ruled in favor of the ex-spouse. I agree it is a reminder that clients should make every effort to insure beneficiary designations are current.

  2. Nevin E. Adams, JD
    Posted March 22, 2016 at 11:31 am | Permalink

    Evan, your point is well-taken. The decision could have come out differently if the plan document was crafted differently.

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