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Peter's reference to Larry Starr can be summarized at this comment. Larry makes a good point, and every consultant should be aware.

I agree with bzorc and Bri. We had this situation a few years ago… the auditor asked the same question. When I pointed out that the prior year was not a short year of 7 months or less, they agreed and did two audits… one for each year. As bzorc said, I think this rule was for the initial year being less than 7 months.

If you are referring to employee deferrals, that is a tax payer calendar year limit, not a plan limit. There is no proration to the 402(g) limit or need for a correction.

For many ERISA-governed individual-account (defined-contribution) retirement plans, it’s at least possible, and often typical, to design a plan so a participant’s claim for a distribution or a loan usually does not require a spouse’s consent. Some observers question whether Congress should have set public policy that way. Some advisers might invite a retirement plan’s sponsor to consider whether one’s plan should require a spouse’s consent for some kinds of claims and directions even if neither ERISA § 205 nor an Internal Revenue Code tax-qualification condition calls for the plan’s provision. Reasons for doing so could include a plan sponsor’s desire to protect a participant’s spouse or child from the participant’s decision. Or some plan sponsors might do so to lower the plan administrator’s risks of being dragged into litigation. Even if a complaint fails to state a claim against the plan’s administrator (including when the plaintiff has no standing, or the court has no jurisdiction), getting rid of litigation bears distraction, time, and expense. Yet, some question how much a retirement plan ought to do in protecting spouses from one another. Or in protecting a child from one’s parent. Also, some plan sponsors prefer to avoid a provision that could, for a distribution or loan before the participant’s death, slow down or make nonroutine a computer’s processing of the claims. These and other choices about whether a plan provides survivor annuities or other plan-provided spouse’s-consent constraints, perhaps including some beyond ERISA § 205, are choices for a plan’s sponsor to consider. How much an adviser explains to its client turns on the scope of their relationship. Bird, a mainstream choice is for a plan’s sponsor is to get rid of (at least) survivor annuities (if not all annuities); provide a surviving spouse the whole of a participant’s account, absent a qualified election with the spouse’s consent; and otherwise not restrain a participant’s claims and directions. But, for some reasons mentioned in this discussion or in other BenefitsLink discussions (including those in which Larry Starr explains why his clients’ plans provide a qualified preretirement survivor annuity and tolerate the regimes that go with it), that mainstream choice might not be right for every plan.

Bill, of the 327 QDROs I wrote last year alone, 93% of them were property divisions equalizing the parties' financial positions with respect to retirement monies. Of those, better than 22% affected an abused spouse, and of those abused spouses, all but 2 of them were women. Among those 327, in only 2 cases were women's retirement savings greater than their spouses, and the court ruling to equalize their financial positions did not create a windfall for an abuser. Support QDROs I wrote for that period were limited in scope and duration, and all were written providing support to women who earned less than their spouses, or children who would have gone without basics but for the support orders that were possible only because the affected plans had spousal consent requirements, and turned away participants who would see their own children hungry and homeless. The measure of "undeserving spouses" (abusive or willfully unemployed with no children at home) affected favorably by QDROs I've written is vanishingly small in my experience (less than 4 in thousands), and I've been at this for 25 years. So, might it happen? Sure. Does it happen much? No. In a perfect world, women and men would earn the same pay for the same work, and both would be represented equally in careers having comparable retirement benefits. That is not the world we live in. I cannot even count the number of times a litigant (mostly men, but not all) cashed out their 401ks in the month or two preceding marital separation in order to dodge the application of marital property law, and I've then had to tell divorce counsel no QDRO is possible because of it. The disenfranchised spouse then loses everything because a plan had no rule requiring spousal consent, leaving state family courts unable to apportion marital assets, or provide support for children.

Aha!. This implies the plan now has spousal consent language. Don't simply ignore it, or amend it away, without checking with your ERISA attorney.

I provide no advice. The plan’s administrator with its lawyer, and the independent qualified public accountant (IQPA) with its lawyer, might consider these steps and others. The plan’s administrator prepares a complete set of the plan’s general-purpose financial statements according to generally accepted accounting principles. One imagines most (but not necessarily all) amounts would be zeroes. The notes to these financial statements would include (at least) required explanations and other points. The IQPA reads the plan’s governing documents. The IQPA reads the employer’s business-organization documents to get reasonable assurance that no contribution was declared. If a bank or an insurance company set up an account, will the qualified institution furnish a certification to confirm the plan’s zero assets and that no money or property was delivered for investment? Absent a certification the IQPA may rely on, the IQPA performs such audit procedures as the IQPA finds appropriate to get reasonable assurance that the plan has no asset and has no contribution receivable. For each audit procedure the IQPA ordinarily would perform regarding another retirement plan, the IQPA records in the IQPA’s work papers why the procedure was unnecessary in this plan’s circumstances. The administrator signs a management-representations letter to state facts the IQPA reasonably requests to be confirmed. The IQPA reads the management-representations letter to find that all requested facts are stated. The IQPA reads the administrator’s Form 5500 report and schedules to find that these are logically consistent with the plan’s financial statements. The IQPA writes and delivers its audit report. The IQPA writes and delivers the after-audit communication required under generally accepted auditing principles.

As I understand it, IRC Section 409A requires that any change to the time and form of distribution must defer the commencement of payment(s) at least five years beyond when it would otherwise be required to commence. If your payments were originally required to commence at the earlier (or later) of age X or separation then 5 years must be added to such timing. Adding 5 years to only the age component does not satisfy that requirement.

Correct, that is the usual application but it could also apply if a change in plan year created a short plan year

Here's the blurb from the 5500 instructions: (2) Short Plan Year Rule: If the plan had a short plan year of seven (7) months or less for either the prior plan year or the plan year being reported on the 2021 Form 5500, an election can be made to defer filing the accountant’s report in accordance with 29 CFR 2520.104-50. If such an election was made for the prior plan year, the 2021 Form 5500 must be completed following the requirements for a large plan, including the attachment of the Schedule H and the accountant’s reports, regardless of the number of participants entered in Part II, line 5. As of 12/31/21, I don't think either 2021 or its prior year was the short year.

Consider that, without regard to anything in Internal Revenue Code of 1986 § 223, a banking, insurance, or securities business might choose not to open an account for a non-U.S. person. Among several potential reasons, a business might do so to streamline its procedures or lower its expenses for obeying Federal and State know-your-customer and anti-money-laundering laws.

If anyone is aware of any problems arising from removing annuity options, please post. We all come at this from different angles, but as a TPA, I want to keep things as simple as possible in a complicated field, and don't want to have to explain to someone why spousal consent is needed just because a plan is written a certain way when it didn't have to be, and when the IRS has given us a specific exception to the cutback provisions allowing us to remove annuity options (and indirectly remove spousal consent requirements).

Defined contribution plans fall under ERISA, and they also fall under the Federal TSP section of the US Code, and they fall under the laws of every State, County and Municipal Plan. The answer to the question posed just may vary with the underlying statutory basis of the plan. More details would have been helpful. For example, re: TSP plans, see https://www.tsp.gov/planning-for-life-events/marriage-and-spouses-rights/ It is my understanding that if a plan is subject to the REA, spousal consent will be required for in-service cash distributions, hardship withdrawals, and plan loans. Spousal consent will not be required, however, when a participant requests these same types of distributions from a plan designed with the REA safe harbor feature. I don't pretend to know how that works in practice. Before you take any action you need to consider whether or not you want to become involved in a Federal case. I don't think the answer to your question will be found on this blog. A wise attorney for the Alternate Payee will send the Plan Administrator a Notice of Adverse Claim/Interest at the earliest possible time and encourage the Plan to take no action that would result in their being potentially liable for double payments and legal fees. DSG

This is thinking strictly from the 1950's believing you're protecting the stay at home wife. What about the wife that has a decent job but an abusive home life. She wants to leave, but the only money she really has is in her 401(k). But the spousal consent requirement for any distribution or loan guarantees she can never access the funds to save herself because the husband would never agree. Perhaps consent requirements going away aren't "always to the detriment of those most in need..."

Beyond a plan having an annuity form of benefit triggering the necessity of a QJSA, there are the more fundamental legal reasons of ownership interests and potential support obligations, so I would urge the trustees to think carefully about that before amending the plan to remove spousal consent requirements. In community property states, as well as in many common law states, money earned from employment during marriage is marital property, and that includes deferred compensation. A marital community stands in the shoes of a co-owner of deferred compensation, not in the shoes of a creditor -- a major distinction that should guide the trustees' thinking. Additionally there are spousal and/or dependent support interests that are often addressed in family law litigation and paid via 401k loans, QDROs, and distributions, which, without consent requirements, are destroyed, and always to the detriment of those most in need of the protection afforded by consent requirements. The only reason I can think of to do away with a spousal consent requirement is a conscious, extrajudicial decision to undermine family law, in a way that is abhorrent to public policy.

If we had clients continuing to operate on a different trust agreement, we noted that on the signature page. It was an option in the software. Did you do anything like that?

1. Yes. 2. Yes, but note that the employer has 90 days into the performance period to establish performance-based comp criteria, so your example could still be performance-based compensation. The 409A rules around performance-based compensation generally deal only with the timing of an initial deferral election.

If you are concerned file IRS change of address From 8822-B

Then don't the existing trust provisions apply?

I would. couldn't hurt. This way, they get the new address earlier.

I'd like to give you the benefit of the doubt and assume you are using shortcuts in your language. To be precise, it is the presence of annuity options that triggers the QJSA. So it's not like you can just remove the spousal consent (and leave annuity options). Back in the day (1980s!), my mentor had the attitude that you just included any/all options; no reason to limit a participant. Then, the rules changed so if you had any annuity options, the QJSA was the default, which required spousal consent to waive and take a lump sum. Fortunately the IRS allowed us to remove those options without it being a cutback, and we did that for most of our plans.

Ha, and also watch out for TPAs whose forms insist on a spot for spousal consent to be notarized even when the plan doesn't require it!

Belgarath, I'll be interested in seeing whether anyone is aware of specific guidance on point. I could not find any. I can see the argument, in that you can aggregate 401(a) and 403(b) for 410(b) and 401(a)(4), and you can read 416 and the regs as saying you can aggregate for top-heavy any plan that you can aggregate for 410(b) and 401(a)(4). On the other hand, I don't see in the statute or 416 regs where "plan" is defined, so one could also argue that the only "plan" being referred to in 416 and the regs is a plan that is subject to 416, which of course 403(b)'s are not. On the policy side, it is arguably unfair to not let you aggregate just because the plan that you are aggregating with could not itself be top-heavy, since the point of the top-heavy rules is to make sure that non-control folks get significant benefits and the 403(b) balances are benefits. But as you know the IRS generally prefer technicalities over policy, and the courts will use policy at best as a tie-breaker, and arguably this doesn't rise to the level of a tie on the technicalities.

If these are unfunded plans, the key issue is exactly which person is obligated to pay the deferred compensation. If the two obligations (or sets of obligations) your client seeks to merge would change which person is the obligor, would any executive object? When I represent an executive, we negotiate that no provision of the plan (really, a contract) can change without the executive’s affirmative written consent. When the executive is asked, she looks at whether the proposed obligor’s financial strength and claims-paying ability are or would become stronger or weaker than those of the existing obligor.

Some plans prefer to have the QJSA rules apply for beneficiary reasons. If the plan does not have the QJSA rules, the spouse must be the 100% beneficiary unless they provide notarized consent for someone else to be the beneficiary. If the QJSA rules, you can designate someone else for 50% of the benefit. This comes into play when say the owner has kids from a prior marriage that he wants to be beneficiaries.

Yes, and be careful if there is "prior pension" money in the plan. For example, if this plan has been around a while, and was originally a Money Purchase plan that was amended and restated to a Profit Sharing plan, you could have one bucket of money subject to QJSA, and the rest not subject to QJSA. Still a fair number of those out there, although the recordkeeping/accounting is sometimes poor or nonexistent.

If the Plan is subject to the QJSA rules, Spousal Consent is required. If the Plan is not subject to the QJSA rules, Spousal Consent is not required.

The question needs to be analyzed under the Prohibited Transaction rules, which tend to be fact sensitive. As part of the analysis one may well run into questions of enterprise organization and ownership (part of those important facts). For what it is worth, I would approach the question with a bias toward the negative, but would not presume anything. In other words, you are not going to get a reliable answer based on what you have provided*, except that it is a complicated question that deserves the attention of competent legal counsel if they are serious about the proposition. Oh, and I think it is unwise in any event. Part of the underlying philosophy of ERISA and the prohibited transaction rules is that one’s employment (and related income) should be insulated from one’s retirement savings. Eggs in a basket and all that. *Providing more information is quite unlikely to get a reliable response, except perhaps a negative. This is not the place for this kind of advice — too complicated and too important —especially for those who may be presumed to be able to pay for it.