Nonqualified plan sponsors: Beneficiary designations may require attention

A recent court decision highlights the importance of up-to-date beneficiary designations for participants in nonqualified retirement plans. Without up-to-date designations, the payment of the benefits of a deceased participant in a nonqualified plan may be contested, which can result in additional expense for the plan sponsor or the participant, and may also result in the benefit not being paid in accordance with the deceased participant's wishes. This article summarizes steps that plan sponsors can take to mitigate the risks and costs related to beneficiary designations. The decision bringing attention to beneficiary designations in nonqualified plans is E & J Gallo Winery v. Rogers. Amending the plan document to clarify provisions relating to beneficiary designations should eliminate some of the questions and ambiguities that arise when a participant dies. With clear provisions, plan sponsors will be better able to assess the status of claims by "alleged" beneficiaries, and may not need the court's assistance in identifying the proper beneficiary.