New NICSA Survey Finds Wide Variation in Policies on Beneficiary Designations

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Survey results find little consensus among providers when it comes to policies for naming beneficiaries

Policies and procedures regarding beneficiary designations vary widely, concludes a NICSA survey of retirement plan administrators and individual retirement account custodians released today. The survey was conducted in June by NICSA’s Retirement Committee, with the assistance of the Insured Retirement Institute.

Beneficiary designations are important to consumers because retirement accounts are excluded from an investor’s estate upon death. Instead, the assets in the accounts are transferred to heirs according to the terms of the beneficiary designations provided by account holders.

The survey found little consensus among providers when it comes to policies for naming beneficiaries or for the documentation required after death. For example, there was no consensus on the appropriate default beneficiary when an IRA account holder fails to name a beneficiary. Only 30% of respondents name the estate as the default beneficiary, while 43% designate a surviving spouse and then the estate, and 22% distribute first to a surviving spouse and then to children -- and only after that to the estate.

Even in policy areas where there was more consensus, there was rarely unanimity. Few survey responses received close to 100% support.

Because of the variance among firms, investors and their beneficiaries working with more than one provider could well be subject to multiple policies and will likely need to provide each provider with different information.

“There’s usually a lot more consistency in operational policies in the asset management industry than there is here,” notes Theresa Hamacher, NICSA’s President. “We hope that the survey generates a dialogue about policies for beneficiary designations.”

Beneficiary designations can be very complex, which means that administering them often involves considerable manual processing. In fact, only 1 in 4 survey respondents have an online capability that enables investors to update designations themselves.

Complete survey results are available to NICSA and Insured Retirement Institute members at http://www.nicsa.org and http://www.irionline.org.

About NICSA–NICSA is a not-for-profit trade association founded in 1962 that provides the global investment management industry with discussion and education forums to better serve its customers by developing operational best practices. NICSA forums enable associates of asset managers, distributors, and service providers to collaborate to establish standards for operational best practices to assist compliance with regulations and continuously improve operating performance; stay up-to-date on the latest developments through education and information sharing; learn about trends in all types of investment vehicles, including mutual funds, hedge funds, unit investment trusts, UCITs and ETFs and connect members with peers to network and learn from each other, and foster skills that can help advance careers. For more information, visit http://www.nicsa.org.

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Alyssa Gagen
NICSA
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