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COLA with J&S

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Hi, A DB plan offers benefit option of Joint and Survivor combined with a years certain annuity. The J&S can use non spouse as the survivor (and of course there is a maximum % allowed based on the age difference between participant and the non spouse survivor). The plan offers cost of living (COLA) increases as well (up to 4.99%)----the  benefit at RMD age/ret. is reduced  due to the future increases of 4.99% per year. Is this COLA allowed to be used in a case where you are using a non spouse for the J&S? Thank you

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To clarify my question above: A DB Plan was set up to allow for an option of J&S, and non spouse survivor allowed, combined with a years certain with up to a 4.99% COLA. Question: is this COLA allowed even when the survivor of the J&S is a non spouse? Thank you for any insights. 

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hello ... Seems like you are asking whether the incidental benefit requirements (covered in the regs at 1.401(a)(9)–6) automatically preclude a DB plan from providing a J&S form of payment with certain and life and COLA features where the beneficiary is not the spouse. If that's the question, the answer is that a plan can provide this form, as long as the non-spouse beneficiary is not TOO much younger than the participant and the COLA feature meets the requirements spelled out in the regs.

How much younger is too much? This depends on the participant's age at payment commencement, the J&S % to be continued to the beneficiary and the length of the certain period. In other words, there's not a blanket Yes or No answer to the question, it depends on the details ...

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Thank you very much Sellarsian and A Happy and Healthy New Year..Yes, that is what I was asking (as the regs limit the % to be used for the J&S based on the age difference batten the participant and the non spouse survivor and therefore was asking if the COLA was limited as well). If the participant is 70 and the non spouse survivor is 20 and using a 50% J&S WITH  120 month certain can a COLA up to 4.99% be used? What if the participant is 70 and the survivor is 47 and using 67% J&S WITH 120 months-can a COLA UP TO 4.99% be used? -----I know there is a table that limits the J&S % based on the age difference between the participant and the survivor, however, I'm unaware of a table that shows the COLA  that can be used (if any) based on the age difference between the participant and the non spouse survivor. THANK you very much.

 

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