Elimination of QPSA/QJSA

[Guest nbs]

I have a Profit Sharing plan that has had annuities as an form of payment and therefore required the QPSA and QJSA notices, etc. I've been reviewing the new adoption agreement (that was completed by the document sponsor) for the GUST restatement. They still have annuities selected as an option for payment, but they are telling the client that the plan is exempt from the QPSA and QJSA requirements. They're saying that "annuity" can mean single life (which requires no spousal signature) and that as long as the spouse (in the case where there is one) is the beneficiary, the notices are no longer required. This is how they eliminated the J&S from their plans.

I've had several plans eliminate J&S from the plan during the restatement process, but they also eliminated all forms of annuities at the same time. I've also done some research that seems to indicate that if you have annuities (any form) in the plan, you still have to give the QPSA and QJSA notices.

Can you have annuities in the plan without being subject to the QPSA and QJSA requirements?

[Blinky the 3-eyed Fish]

No.

[Guest Calimayhew]

So, a defined contribution plan that is amended to eliminate annuities as optional forms of benefit (lump sum is only remaining benefit option) is no longer subject to the QJSA/QPSA rules?

[Blinky the 3-eyed Fish]

Yes.

[Belgarath]

Blinky - are you positive about this? My understanding was that the change does NOT eliminate QJSA requirements. This would apply to DC pension plans, and PS plans which were, for example, amended and restated from pension to PS. This "prior pension" money would still be subject to QJSA. So although 411(d) is modified, I think 417 still trumps 411(d) for QJSA. Vat you tink?

[Blinky the 3-eyed Fish]

You are correct that you cannot eliminate annuities in a pension plan or , say, money merged from a pension plan, but that is not what the question asked.

"...a defined contribution plan that is amended to eliminate annuities..."

In a pension plan you couldn't eliminate annuities in the first place to get to step 2, the removal of the QJSA requirements.

[Belgarath]

Yes, you're right, it would helpif I read the question carefully first. But that's asking a lot, since my brain is in a geometrically progressing state of entropy.

While it's just a matter of semantics, I guess I'd state it a little differently. Something like " A DC pension plan can be amended to eliminate annuity forms of payment to the extent that QJSA requirements don't apply" or something along that line. So if you had a DC pension plan with no married participants (or a QDRO requiring QJSA) you could have no annuities whatsoever for payment options.

As an aside, does anybody ever take any form of life annuity payment? I've only ever seen one. And that was only because the benefit was funded with an existing deferred annuity, and the ins. agent got a commission if they settled under an annuity option...

[david shipp]

The "profit sharing" exemption from QJSA requirements (401(a)(11)(b)(iii))provides that the QJSA requirements don't apply to defined contributions plans that are not subject to minimum funding requirements if several conditions are met. One condition is that the participant does not elect a life annuity.

Most prototypes contain this exemption and provide that lump sum is the normal form under the plan while also offereing a full range of other benefit forms including annuities. In this instance, the QJSA requirements only kick in if the participant elects a life annuity form of benefit. A participant can elect lump sum or installments without spousal consent.

[maverick]

Belgarath:

In 7+ years I have not had one participant select the annuity option.