Spousal Consent

[Guest DTrom]

If a "safe harbor" profit sharing plan provides that a lump sum is the normal form of benefit, but also provides that a joint and survivor annuity is an optional form of benefit, are the spousal consent rules in effect? Or is spousal consent only required when the normal form of distribution is an annuity?

Thanks!

[Guest Mike Melnick]

Is the QJSA the only annuity option being offered? There could be a problem if you were offering other annuity options. For example, if a married participant elected an annuity other than a QJSA, my undersatnding is that spousal consent would be required for that election.

[mbozek]

Why not amend the plan to eliminate the annuity options since they are a pain to administer and limit distributions to lum sums?

[Bird]

Yes, if J&S is an option, spousal consent is needed. Designating one form of benefit, e.g. a lump sum, as the "normal" form doesn't mean much of anything, IMO.

There are pros and cons to having annuities in a plan that doesn't have to have them, but for the most part I agree that they are a nuisance and write new plans with lump sums only. We'll look at removing annuity options in the next restatement go-round.

[Guest ritchie]

What are the pro's?

[Bird]

Maybe only one that's worth anything, and that has limited use.

An annuity plan can be written so that you can name someone other than your spouse as beneficiary for half of the account, without getting spousal consent.

[Guest Mike Melnick]

I am curious how Bird reached the conclusion that spousal consent is always needed, if J%S is an option.

If you look at the Regs 1.401(a)-20, (Q&A 3) it lists the requirements that a profit sharing plan must meet in order to be exempt from the survivor annuity requirements. Specifically, it requires that the participant NOT elect a life annuity.

I read that to mean that if the participant elects the lump sum, he is not subject to survivor annuity requirements, including spousal consent.

[Guest ritchie]

I am curious about

An annuity plan can be written so that you can name someone other than your spouse as beneficiary for half of the account, without getting spousal consent.

Can't a profit sharing plan that does not provide annuities allow 50%/50% beneficiaries? Is there something that says that a spouse must be a 100% beneficiary?

[Blinky the 3-eyed Fish]

Mike, I have a much different read on that cite. It is describing when a plan is subject to needing to offer J&S not when spousal consent is required. You can be sure that if the plan offers J&S and you don't elect the J&S, you need spousal consent.

Ritchie, I believe one of the rules for being exempt from providing annuities is that the spouse must be 100% beneficiary unless they waive. In fact here is the cite in Q&A - 3.

(1) The plan provides that the participant's nonforfeitable accrued benefit is payable in full, upon the participant's death, to the participant's surviving spouse (unless the participant elects, with spousal consent that satisfies the requirements of section 417(a)(2), that such benefit be provided instead to a designated beneficiary);

[Guest ritchie]

Well then, be like that. Some creatures just know everything. Happy Mothers Day Blinky.

[Guest DTrom]

Thanks everyone for their comments. I'm happy to see that what I thought was possibly a stupid question did generate some different opinions. I had read something similar to what Mike mentioned in his one post regarding the need for spousal consent, and that led to my confusion.