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PPA Qualified Optional Survivor Annuity


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Our plan has a 50% QJSA, but offers an optional 100% JSA. Under the PPA, if the QJSA is less than 75%, then a 75% "qualified optional survivor annuity" (QOSA) must be offered. Some of the write ups we're seeing say at least 75%, but Code Section 417(g) seems to say it must be equal to 75%. Does the 100% JSA that we offer suffice, or do we need to add a 75% JSA starting in 2008 to comply with the PPA?

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I believe that if you don't offer a J&75 you must change the QJSA to be the J&100. In other words, you don't need to change the options offered, but you need to change the QJSA from the J&50 to the J&100.

Another option is to add a J&75 and make it the QJSA.

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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Thanks. That seems to be the consensus among those I asked. If your automatic form of QSJA is a 50% QJSA then you must add a 75% QOSA starting in 2008, even if you already have a 100% QJSA as an optional form. Alternatively, make the 100% QJSA the automatic form, or even a 75% QJSA.

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It simplest just to have j&50%, J&75%, and J&100%. No big deal calculation-wise and just a few more lines in an already overcrowded election form. Then, government is thrilled and employees are indifferent, since where lump sum payment form is available, they will elect it.

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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Guest jmc51

Under the 411 regulations, protected benefits that may be eliminated or reduced include:

"(ii) Joint and survivor annuity. A plan that provides a range of three or more actuarially equivalent joint and survivor annuity options may be amended to eliminate any of such options, other than the options with the largest and smallest optional survivor payment percentages, even if the effect of such amendment is to change which of the options is the qualified joint and survivor annuity under section 417. Thus, for example, if a money purchase pension plan provides three joint and survivor annuity options with survivor payments of 50%, 75% and 100%, respectively, that are uniform with respect to age and are actuarially equivalent, then the employer may eliminate the option with the 75% survivor payment, even if this option had been the qualified joint and survivor annuity under the plan."

Wouldn't this undercut the requirement that plans with a 50% j&s and 100% j&s would have to provide a 75% since under IRS regulations, the plan could turn around and delete the 75% option. Also, this provision could be relied upon to delete the 662/3 option if one implements a 75% option for plans that currently have a 50% and 66 2/3%.

I realize these are pre-PPA but Congress did not provide authority to IRS to amend these reg's that means that IRS would have to do so through notice and comment. That means more time. In the meanwhile, isn't this a reasonable position.

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No, this is not a reasonable position. You are right that it wouldn't be a violation under Code Section 411(d)(6) to eliminate the 75% J&S annuity, but it would be a clear violation under Code Section 417. Nice try.

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