A power of attorney (POA) is a writing or other record, governed by state law, that grants authority to an agent to act in the place of a principal in financial or other matters. For retirement plan sponsors, POAs can be an effective tool to safeguard benefits of a plan participant and can, if needed, authorize an agent to act regarding aspects of the participant's retirement benefits.
Recognizing that each state differs in the requirements of a valid POA, this article focuses on Wisconsin law in the name of simplicity. Plan sponsors should pay special attention and exercise caution upon receipt of a POA to ensure that the document is legally compliant and authorizes an agent to act with respect to retirement plans.
Requirements for a Valid Power of Attorney in Wisconsin
In Wisconsin, to be a valid POA, the document must meet the following requirements.
Principal and Agent. The POA must designate a principal—the individual who grants authority to an agent in a POA—and an agent, the person granted authority to act for a principal under a POA. Plan sponsors should ensure that the individual submitting the POA, and purporting to act on a participant's behalf, is the designated agent.
- Coagents. A principal may designate two or more persons to act as coagents. Unless the POA provides otherwise, Wisconsin law presumes that each coagent may act independently on the principal's behalf.
- Successor Agents in Wisconsin. A principal may also designate one or more successor agents. A successor agent may only act only if the agent resigns, dies, becomes incapacitated, is not qualified to serve or declines to serve; which should be evidenced in writing. Except as otherwise provided in the power of attorney, the successor agent will have the same authority as granted to the original agent. Plan sponsors should exercise special caution when a successor agent submits a POA purporting to act on a participant's behalf without evidence that the first agent is unable or unwilling to serve.
Execution Requirements. In Wisconsin, the principal, or the principal's designee, must sign the POA. A signature of the principal or designee is generally presumed genuine if the principal makes an acknowledgment of the power of attorney before a notarial officer. Before allowing a designated agent to act on behalf of a principal, plan sponsors should ensure that the power of attorney is executed in accordance with applicable state law.
Effective Date. In Wisconsin, the general presumption is that a POA is effective when executed by the principal, unless the principal provides that the POA will become effective upon a future date or upon the occurrence of a future event or contingency. A common contingency is that the power of attorney will become effective upon the principal's incapacity, which is often established by a written certification from a physician attesting to the principal's incapacitation. Upon receipt, plan sponsors should ensure that the POA is currently effective. If the POA does not become effective until the principal becomes incapacitated, or upon satisfaction of another occurrence, plan sponsors should request documentation of such condition before relying on the POA.
Termination. A POA generally only terminates upon the principal's death or when the principal revokes the power of attorney. A non-durable POA also terminates upon the incapacitation of the principal. Conversely, an agent's authority will terminate when the principal revokes the authority, the agent dies, becomes incapacitated or resigns, or the power of attorney otherwise terminates.
Retirement Plan Authority in a POA
Even if a POA appears validly executed and currently effective, because POAs vary widely in scope and authority, the POA may not necessarily grant an agent powers over retirement plans. In Wisconsin, to grant an agent authority regarding retirement plans, the POA must incorporate one of the following:
- Citation to the Wisconsin statute that describes retirement plans under a POA;
- Reference in a POA that grants general authority over retirement plans; or
- Specifically states that the agent has authority to do all acts that a principal could do.
In Wisconsin, "retirement plan" in a POA encompasses individual retirement accounts; a Roth IRA; annuity or mutual custodial fund; pension, profit-sharing, stock bonus or other retirement plan; 457(b) plan or a nonqualified deferred compensation plan. A POA does not need to list the specific type of retirement plan(s) in the document; "retirement plan" is sufficient. A POA grants an agent powers over retirement plans, unless the POA otherwise provides, an agent has the following powers with respect to retirement plans:
- Select the form and timing of payments under a retirement plan and withdraw benefits from a plan;
- Make a rollover, including a direct trustee-to-trustee rollover, of benefits from one retirement plan to another;
- Establish a retirement plan in the principal's name;
- Make contributions to a retirement plan;
- Exercise investment powers available under a retirement plan; and
- Borrow from, sell assets to or purchase assets from a retirement plan.
Limitations on Retirement Plan Powers
Although a POA may validly grant the agent authority over retirement plans, these powers are not without limits. Under Wisconsin law, an agent may only take the following actions with respect to retirement plans, only if these powers are expressly granted in the POA:
- Create or change rights of survivorship;
- Create or change a beneficiary designation; or
- Waive the principal's right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan.
Accordingly, if a POA does not specifically grant the agent any of these powers, the agent will not have this authority with respect to retirement plans.
While POAs may allow an agent to act on behalf of a retirement plan participant, it is important to note that POAs are not a one-size-fits-all. A POA may not allow an agent to act with respect to the principal's retirement plans or contain limitations on the agent's authority regarding retirement plans. Retirement plan sponsors should exercise caution upon receipt of a POA before allowing an agent to take action impacting a participant's retirement benefits.
To ensure that a POA complies with the respective state law, is currently effective, valid, duly executed and grants an agent authority over a participant's plan benefits, plan sponsors should not hesitate to contact their Reinhart attorney for questions regarding the validity of a POA or the rights granted to an agent.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
