Spousal Consent

[Guest RS Vatalaro]

My understanding is that a distribution greater than $5,000 generally requires spousal consent if the plan contains joint and survivor annuity provisions.

This would apply to loans too, say from a 401k plan.

If the plan is not a DB plan or a DC plan that has a required contrib (like MPPP), I am under the impression that the plan does not have to contain a joint and survivor provision, e.g. lump sum can be the only form of benefit if the plan sponsor so desires.

I recently heard two things from a respected speaker at a conference, that concern me. There was a great deal of discussion about this issue among the speaker and conference participants, it was not just a passing comment.

The speaker said that:

a) the IRS would not issue a favorable determination letter on a DC plan (assume no required contribution e.g. a straight 401k plan w/ no profit sharing provision) if the plan document contains no joint and survivor provision.

b) Even if a plan does not have a joint and survivor provision, spousal consent must still be obtained on all distributions in excess of $5,000.

Several conference participants disagreed w/ the speaker. Anyone have any thoughts? Thank you.

[QDROphile]

Speaker is wrong on both, if you have captured the full extent of the message. I'll go one further. We get correct determination letters on profit sharing plans that have J&S distribution options but no spouse consent if the participant gets a lump sum or installments! The normal form of distribution is lump sum. The spouse consent requirements are not triggered until an annuity option is elected. If the participant does not elect an annuity option(e.g. elects a lump sum or installments), no spouse consent is necessary for the distribution. But you might have to walk the reviewer through Treas Reg section 1.401(a)-20 Q&A(3)(a), because some of them are not aware of the rules. The plan stills need spouse consent for designation of a death beneficiary other than the spouse.

[Guest Julie]

Our 401(k) plan has a spousal consent requirement, and we require the spouse's signature to be notarized. By the way, I'm also a notary.

To make a long story short, an instance occurred with one of our "constantly borrowing" participants to cause us to look back at previous loan applications and compare her husband's signature. We discovered that her husband's signature on the last request she turned in did not match any of the other signatures. Now, we don't know what to do. It's a notary's duty to notarize "in the presence of", but if the notary is not doing his or her job, where does our responsibility as an employer come in.

Should we confront the employee with what we've discovered, should we turn down our newest request? Help!!

[Guest gpr]

Julie, I personally use two different writing styles, depending upon various factors, including the surface I'm writing on (is it significantly above or below my comfortable writing level, or at an angle, for example), and the mood I'm in. The weather and phase of the moon probably have something to do with it as well for all I know. While I do predominantly use one, the other does pop up frequently enough that I sign both styles of signatures on signature authorization cards. So, I personally don't make the assumption that the signature is a forgery right away when some one else does this. However, I think it is prudent to question the participant on the issue before making any kind of distribution, but would try to be diplomatic in the approach. I would expect someone who is not familiar with both of my signature styles to question me in this kind of case, and wouldn't take offense at it when asked.