Eliminate QJSA as normal form under PSP?

[Guest Kathleen Meagher]

A profit sharing plan provides that a joint and survivor annuity is the "normal form" of benefit, and requires spousal consent to distribution in any other form. Assuming that the employer doesn't want to eliminate annuities altogether, may the plan be amended to say that annuities are not the normal form, but are one of several options, thereby eliminating the requirement for spouse's waiver of J&S? I don't think spouses are protected under 411(d)(6), but would this change present any other protected benefit problems? Would the 90-day notice that applies to eliminate of annuities apply in this situation?

[SoCalActuary]

You need to consult the 417 regulations on J&S benefits. If the profit sharing plan has ever held pension benefits (eg rollover from MP or DB plans) then the participant has a duty to provide the spouse with a J&S benefit. The plan has to enforce this right with valid election procedures.

I suspect the result of your research will be that the normal form cannot be changed even if you have no old pension money, because you still want to allow annuity options.

[maverick]

Survey:

Has anyone ever had someone elect an annuity as the form of payment?

In 8+ years at this game my answer is ZERO.

[No Name]

Twenty three years - one annuity request. Interestingly, monthly payment were made from the trust for the life of the participant, which was short.

[Guest Harry O]

No Name,

How can a DC plan make life annuity payments without buying an annuity contract?

[rlb64]

In my view a profit sharing plan can eliminate QJSA rights if there are no transferred assets. It would be subject to the 90 day rule for elimination.

[SoCalActuary]

rlb - does it require them to eliminate all annuity forms (as I suspect)?

[rlb64]

I know that many plans such as prototypes invoke QJSA rights if there are any annuities, but I don't think it's required. The plan can trigger QJSA only if the participant elects an annuity.

[Bird]

rlb is right, the plan could be written so the QJSA only kicks in if an annuity is elected. But that doesn't solve the problem of getting waivers.

Let's be practical. If a participant wants an annuity, he can do an IRA rollover and annuitize the IRA. I wouldn't be concerned about keeping annuity options in the plan just in case someone wants one.

[Lynn Campbell]

Is the 90 day requirement still in effect, or did EGTRRA remove it?

[SoCalActuary]

Maybe I'm confused on the answers here. But it seems to me that REA requires that spousal consent be given for any optional form not a QJSA when the plan allows any annuity option.

[rlb64]

Lynn, I think last year there was a proposed amendment to the 411d6 regs to eliminate the 90 day rule, but I haven't heard we can rely on that.

SoCalActuary: See Reg. 1.401(a)-20, Q&A4. QJSA rights can be limited to participant elections of an annuity. This tells me spousal consent can be avoided for lump sums, installments, and a J&50% survivor (normal form of annuity).