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Financial companies willing to issue small J&SAs


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I'm terminating a plan for an employer/client.  It is subject to the QJS&A rules.  Two former employees have each about $6000 in benefits.  Neither will respond or send back an election for lump sum or direct rollover (with spousal consents).  Which financial companies are willing to deal with such small amounts for JS&As?  Any other ideas are welcome.  Thank you.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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Given that no power on earth can make them elect out of the QJS&A option, you just need to find somewhere to buy them, even if it means calling for an insurance agent to sell you individual annuities.  Did everyone else elect out?  If not, perhaps an annuity search firm can help you find an annuity provider.

Is this a defined benefit plan or a defined contribution plan?  If the former, clearly the extra cost for a QJS&A must be borne by the sponsor.  If I remember correctly (I don't usually have much involvement with defined contribution plans), a defined contribution plan has factors to convert the account balances into annuities, and the extra cost of actually buying annuities also would have to be borne by the employer.

Always check with your actuary first!

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I've faced this precise problem.  We could get no insurer to sell a deferred annuity, so the other option was to determine the accrued benefit as an immediate J&S: plan default but assuming a reduction for immediate commencement (probably about age 35).  Of course, no such option was in the plan, but the plan termination was being held hostage.  The monthly amount was very small (~$10).

In hindsight, I wish we had told the participant in advance, as a method to spur a response.  ("If you don't return the signed election form within X days, the plan will provide your benefit as an immediate ..... annuity in the approximate amount of $Y per month, and you will have no other options.")

 

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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"In hindsight, I wish we had told the participant in advance, as a method to spur a response.  ("If you don't return the signed election form within X days, the plan will provide your benefit as an immediate ..... annuity in the approximate amount of $Y per month, and you will have no other options.")"

That ought to be standard operating procedure whenever a plan subject to the QJS&A requirements terminates.  Set a date for responses and make it clear that whether they like it or not, they will find their options closed if they don't respond.  Follow up with registered letters, phone calls etc. 

Always check with your actuary first!

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On 11/7/2017 at 10:09 AM, My 2 cents said:

If I remember correctly (I don't usually have much involvement with defined contribution plans), a defined contribution plan has factors to convert the account balances into annuities, and the extra cost of actually buying annuities also would have to be borne by the employer.

You remember incorrectly.

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