Beneficiary Designations: A Year-End Reminder for Plan Sponsors
Year-end provides plan sponsors an opportunity to remind employees about an often-overlooked retirement plan task: reviewing beneficiary designations.
Participants may name beneficiaries when they first enroll in a retirement plan and then give the designation little thought. But major life changes can affect whom an employee wants to receive their retirement plan benefits. A periodic review can help encourage employees to confirm that the information on file still reflects their wishes.
Why Beneficiary Designations Matter
A beneficiary designation identifies who may receive a participant’s retirement plan benefits after their death. Retirement plan participants generally designate beneficiaries according to procedures established by their plan. Some plans also set requirements for whom participants may name as a beneficiary.
Marriage can introduce additional requirements. Many retirement plans require a married participant to obtain a spouse’s written consent to change beneficiaries or the form in which benefits are paid.
Missing or outdated beneficiary designations can create complications for families and additional administrative work for the plan sponsors and providers. Without a clear, current designation, plan sponsors and providers may need to research family relationships, request legal documentation, apply the plan’s default beneficiary provisions, or address competing claims.
Because requirements vary, plan sponsors and participants should follow their plan documents and work with the appropriate plan providers or advisors when questions arise.
When Employees May Want to Review Their Beneficiaries
Marriage or divorce, the birth or adoption of a child, the death of a beneficiary, or changes to an estate plan may warrant a beneficiary review. Employees may also want to revisit their designations if they cannot remember whom they named or have not reviewed the information in several years.
A review should include both primary and contingent beneficiaries when the plan permits them. Employees should follow the plan’s established process to make any necessary updates.
How Plan Sponsors Can Encourage a Year-End Review
Plan sponsors can make the process easier by adding a beneficiary reminder into existing year-end communications. A brief note in an employee email, benefits message, or intranet post may be enough to prompt action.
Make the next step clear. If the recordkeeper allows participants to review beneficiary information online, provide instructions for accessing the appropriate section of the participant website. If the plan requires forms or spousal consent in certain circumstances, tell employees where they can find those requirements.
Sponsors may also want to work with their recordkeeper or third-party administrator to identify participants without a beneficiary designation on file, when that information is available. Reviewing the plan’s default beneficiary provisions and building beneficiary reminders into onboarding and life-event processes can help make reviews part of regular plan administration rather than a once-a-year exercise.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.