Surviving Spouse Benefit

[david rigby]

Consider an otherwise vanilla DB plan, safe-harbor. Upon the death of an active employee, the surviving spouse receives a benefit of the following:

- assume the participant had remained employed to NRD, at the same rate of pay as in effect at date of death (thus a "projected NRB"),

- spouse gets one-half of this amount, payable immediately,

- benefit ceases at the earlier of spouse's death or remarriage.

Plan also contains the following statement: "In no event will the death benefits received by the surviving spouse be less than the Actuarial Equivalent of the amount the surviving spouse would have received under the QPSA." [QPSA is defined according to common meaning of that term under the regs.]

I'm not sure the 417 statute or regs would anticipate that a surviving spouse annuity could cease on remarriage. A provision that reduced the amount to the QPSA seems passable, but total cessation does not. Anybody think the quoted sentence above is valid? Any other comments?

[Guest earthy]

I have never heard of the QPSA ending in the event of a spouse's remarriage.

I think there are instances when the actuarial equivalent payable to the surviving spouse can decrease if the participant had the opportunity to elect to waive the QPSA. Defined benefit plans can charge the participant for the death benefit coverage that will pass to the surviving spouse. The charge reduces the overall value of the participant's accrued benefit. Treas. Reg. 1.401(a)-20, A-21.

earthy

[Alonzo]

The benefit paid under the Plan does not meet the definition of a QPSA. See 1.401(a)-20, Q& 18. ("A QPSA is an annuity for the LIFE of the surviving spouse of a participant.") Accordingly, there's no way this can be the default option at death. As earthy points out, this can be an option available to participants, provided the QPSA notice and waiver procedures are followed.

I have seen plans that provide a benefit like the one you desribe to the eligible spouse of a participant, and then power down to the QPSA monthly amount upon the spouse's remarriage.

[david rigby]

That's what I thought also. Thanks for the feedback.

[Guest Keith N]

I think we are all assuming that it is not a governmental plan. If it was, the death benefit may be ok, since the QJSA rules do not apply.