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Found 5 results

  1. I want to make sure my understanding of the QJSA rules for DC plans is accurate. As I read Rev. Rul. 2012-3, if a plan offers a single life annuity or a QJSA as the default form of distribution in the absence of a participant election, and also offers a lump sum, spousal consent is not required if the participant elects the lump sum prior to the participant's annuity starting date. Assume the plan has no annuity investments, and thus, e.g., Situation 2 in Rev. Rul. 2012-3 would not apply.
  2. If a plan allows life annuity distributions, but requires the payment of a single lump sum to an insurance company to purchase a single premium annuity, do the QJSA rules apply?
  3. Say a plan has two options for their forms of distribution - QJSA and lump sum. If the plan allows for in-service withdrawals (with spousal consent), can these be limited to lump sum so that if a participant wants an annuity payment under the plan it must be a QJSA at retirement age and only lump sum before then?
  4. Working on a conversion with a plan sponsor who merged their MP plan into their 401k Profit Sharing plan 14 years ago. The receiving vendor doesn't support annuities, so they can only accept the 401k assets. We explored a partial plan transfer of the k-assets only, but the other vendor won't liquidate by source. Can the plan sponsor and/or participants remove the J&S from the MP assets therefore removing the protected benefit?
  5. The general rule is that the QJSA must be at least as valuable as any other optional form of payment. The only exception is when the 417(e) factors, standing alone, cause a lump-sum to be more valuable. We've come across a plan that grandfathers a lump-sum for all pre-89 service. It's more valuable than the QJSA for the same service, but not because of 417(e)--it's because the lump sum is calculated with an early-retirement reduction factor that is twice as favorable as the ERF for any annuity form. I guess whoever drafted it took the position that the most-valuable rule simply doesn't apply to pre-89 accruals. It looks like the most valuable rule first appears expressly in the 1988 batch of regulations that added it to Q&A 16 of § 1.401(a)-20 and to the definition of "QJSA" in § 1.401(a)-11(b)(ii). Those regs were generally effective for plan years beginning on/after January 1, 1989. To my ear, the Preamble to those regs makes the most-valuable rule sound like a continuation of a previous IRS position, and of course the statutory definition hadn't changed after REA. Has anyone heard of an option to grandfather pre-89 benefits against application of the most-valuable rule? Cheers, Ü
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