Best Practices Concerning Proof of Death and Disability

Q. What are some best practices concerning proof of death and disability?

A. Most providers have standard procedures for acceptance of proof of death or disability. However, if the employer has delegated this responsibility to a third party administrator (TPA), and the TPA notifies the provider(s) in writing that the TPA has provided the necessary confirmation, the provider should process the death or disability distribution request without additional review (assuming it is reasonable on its face).

If the TPA has determined that the distribution satisfies the requirements for a disability distribution, the participant remains responsible for supporting the claim to the satisfaction of the IRS, in order to avoid the Internal Revenue Code Section 72(t) penalty. The provider does not need to impose an additional level of review if the TPA’s determination is reasonable on its face.

In a safe harbor plan, non-ERISA 403(b) for a 501(c)(3) non-profit employer, providers must use standard procedures to process death claims without employer signatures or confirmations. Necessary paperwork and signatures can be obtained from beneficiaries or estates of decedent participant. Employers may only provide factual information and perform ministerial tasks.[1]

[1.] Best Practices For 403(b) and 457(b) plans. April 2018, The American Retirement Association.