QJSA Explanation for MPPP

[Guest Patrick Foley]

The new IRS regs re QJSA explanations, as applied to money purchase pension plans, require that information be provided on the "financial effect" of a purchased annuity contract as well as other available forms of benefit. The explanation can be based on "reasonable estimates of amounts that would be payable under a purchased annuity contract." It sounds to me like prose alone isn't enough to meet the requirement--some rough numbers should be provided.

Has anyone drafted an explanation of the financial effect of a purchased annuity contract in a MPPP for the new regs? Or even thought about what this requirement means?

[Archimage]

If I remember correctly, this onlyapplies to DB plans. I believe for a DC plan that is subject to the joint & survivor rules you only include a statement that the plan will provide the annuity by purchasing an annuity contract from an insurance company with the participant’s vested account balance.

Someone correct me if I am wrong.

[Guest FormsRmylife]

Relative value rules apply only to DB plans, but the financial effect rules apply to both DB and DC. The disclosure must either show estimates of the annuity payment options or a chart (or other format) that would let the participant see the effect of choosing the different kinds of annuities verses installments verses a lump sum. In either case the disclosure would state that the actual distribution will depend on the insurer from which the annuity is purchased and would offer to get more exact information for the participant.

[Guest Patrick Foley]

Thanks, FormsR. It sounds like you don't think numbers are required for a MPPP annuity contract in the "financial effect" disclosure. I read the Reg as allowing estimates rather than exact numbers, but Reg. 1.417(a)(3)-1©(3)(i) still seems to require numbers when it specifies "reasonable estimates of amounts that would be payable under a purchased annuity contract." I would much rather not give numbers, since they wouldn't be very meaningful. I think a descriptive chart in prose, without numbers, would be more helpful tothe employee if the Reg allows it.

[Guest FormsRmylife]

By chart I am afraid that I meant numbers. The idea is if I have $1,000 in my account this would get me a $10 life annuity at age 30 or a $7.50 J& 50% S annuity or whatever the numbers would be. We went to a friendly life insurance company and got their annuity factors to create a chart.

[FundeK]

Corbel has a nice notice that includes a table of factors to allow the participant to calculate their own benefits based on the factors in the table. Do you perhaps use any Corbel documents?

[Guest Patrick Foley]

Thanks for all the help. Knowing I can't weasel out, getting the numbers shouldn't be a problem. I don't use Corbel yet but may get closer to them soon!