100% Joint & Survivor Distribution

[gle3186]

Has the 100% J&S distribution option from a qualified DB plan ever required the application (exclusive of its application in MRDs) of the "minimum distribution incidental benefit" (MDIB) requirement and use of the table in 1.401(a)(9) for both spouse and non-spouse sole beneficiaries when the named beneficiary is more than 10 years younger than the employee? If so, when did such apply, has it changed and if so when? Thanks.

[MGB]

It has always only applied to nonspouses. It was in the 1987 proposed regulations, the 2001 proposed regulations and the 2002 final regulations. A similar requirement applied prior to 1987, although not as specifically laid out in a table. Prior to then, you needed to prove that the death benefit was incidental using general concepts found in prior guidance. Basically, the table was more generous than the prior calculation procedures so you would have been even more restricted back then.

[gle3186]

Thanks so much. I want to make sure I am asking my question clearly and I'll use an example. Let's say the employee retires at age 65 and his non-spouse co-annuitant (he chose the 100% J & S option) is 45. We would use the table in adjusting the co-annuitant's payment, i.e., the MDIB requirement applies--correct?

[MGB]

No, there is no "adjustment" because you never had the option available to them to begin with. There is no J&S 100% option for this person. The maximum option available is the amount in the table. The plan needs to have specific language in it providing this other option. For example, if the plan only has a 100% option, there is no J&S available to this nonspouse. If the plan only has a set of fixed options, you would need to make use of only those that fit under the table for this person.

The plan may have language that "creates" a special option for this person, i.e., the maximum amount in the table is available, but that depends on plan language. The factors to use to convert from the normal form to this option would need to be specified.