Qualified Preretirement Survivor Annuity

[Felicia]

A money purchase plan has QJ&S and QPSA requirements. If the participant dies, can the surviving spouse make an election to receive payments in another form? Everything I've read so far relates to an election by the participant with spousal consent. Would like to give the survivng spouse the option of taking a lump sum option.

If possible, please provide cites.

Thanks.

[Everett Moreland]

Following are notes to myself from some years ago when I concluded that the surviving spouse can waive the QPSA, provided the plan document so allows:

1.401(a)-20 Q&A-33(b) suggests that a surviving spouse may not waive a QPSA:

"A participant in a plan subject to the survivor annuity requirements of section 401(a)(11) generally may waive the QPSA benefit (with spousal consent) only on or after the first day of the plan year in which the participant attains age 35. However, a plan may provide for an earlier waiver (with spousal consent), provided that a written explanation of the QPSA is given to the participant and such waiver becomes invalid upon the beginning of the plan year in which the participant's 35th birthday occurs. If there is no new waiver after such date, the participant's spouse must receive the QPSA benefit upon the participant's death." (Emphasis added.)

Notice 97-11, 1997-2 I.R.B. 49, 54 (dealing with QDROs), indicates that a surviving spouse may waive a QPSA: "If the spouse does not waive the QPSA, the plan may allow the spouse to receive the value of the QPSA in a form other than an annuity." IRS Handbook 7.7.1, Employee Plans Examination Guidelines, Chapter 9, Qualified Joint & Survivor Annuity Requirements, 9.4.6 (3/11/98): "Following the death of the participant the spouse can waive the QPSA and receive an immediate annuity." 1.401(a)-11©(5): "A plan will not fail to meet the requirements of section 401(a)(11) and this section merely because it provides that the spouse of a deceased participant may elect to have benefits paid in a form other than a survivor annuity." 1.401(a)-11(g)(2)(ii):

"To the extent that the pre-REA 1984 law either is the same as or consistent with REA 1984 and the new regulations hereunder, the rules in this section shall continue to apply for years to which REA 1984 applies. (See, e.g., paragraph © (relating to how information is furnished participants and spouses) . . . .)"

[Felicia]

Thanks. You've been a great help.

[KJohnson]

I think EM's cite to the 401(a)(11) regs is right on. There might be some concern that the 401(a)(11) regs were pre-REA, but support can also be found in Treas. Reg. 1.401(a)-20, Q&A 31(b)(3) which provides that "After the participant's death, a beneficiary may change the optional form of survivor benefit as permitted by the plan." Of course it has to be provided by the Plan.

In many (most) QJSA/QPSA plans that have this provision, people do not elect the survivor benefit form of distribuiton prior to the death of the participant. Thus while the QPSA maybe the default, the spouse can change it if the approrpriate language is used in the Plan. Where I sometimes see conceptual problems is where a form of benefit is actually chosen before death and the spouse signs a piece of paper saying that his or her consent to the form of benefit is "irrevocable". Then, it seems a little bit contradictory to say that someone can change an irrevocable election

Of course also always remember: "WDTPS" (What Does The Plan Say).