Spousal Consent for Loan?

[stephen]

Participant balance is greater than $5,000.

Standardized Corbel 401(k) Document.

Plan has elected distribution option: QJSA 100%.

Spouse has signed non-spouse beneficiary designation form.

Who (if anyone) needs to consent to the loan?

[stephen]

Perhaps there are no responses yet because this is one of the many gray areas of the law...

I have not been able to find anything that says definitively the spouse must consent to the loan nor have I found anything that says there is no spousal consent requirement since the spouse has signed allowing for a non-spouse beneficiary designation.

Therefore, I am letting the client know that I have not found that is is a requirement to get spousal consent for the loan but that it may be a good idea to have the spouse sign the consent form anyway so there are no questions about it later.

[Belgarath]

The first question is whether or not the plan/benefit is subject to QJSA rules. There is definitive guidance available, but the answer will depend upon whether or not plan/benefit is subject to QJSA. I'm not familiar with the Corbel document, so I can't answer the first part of the question.

Let's assume this IS subject to QJSA. If so, spousal consent is required for loan where account balance exceeds $5,000. See IRC 417(a)(4), and ERISA 205©(4).

Now, if the plan/benefit is NOT subject to QJSA, then no spousal consent is required. See 1.401(a)(20), Q&A-24.

Of course, the plan can require spousal consent for all participant loans if so drafted. Also, even if the plan does not mandate it, the Plan Administrator may have a policy/loan documents which require spousal consent.

[stephen]

Belgarath,

This plan is subject to QJSA.

The Loan procedures do not require spousal consent.

I find it interesting that IRC 417(a)(4), and ERISA 205©(4) would still require spousal consent if the spouse has allowed the beneficiary designation to be someone else. Why would they be required to consent to the loan if they have waived rights to any benefits form the plan?

It seems to me that based on your post you feel that the spousal consent is required based on IRC 417(a)(4), and ERISA 205©(4) even in cases where the spouse has agreed to a non-spouse beneficiary.

Oh, Great Sorcerer, Thank you for the comments!

[Belgarath]

Yes, that's my humble opinion. The fact that you waive your rights to any death benefit does not mean that you also waive your rights to receive living benefits.

So I assume you have a QPSA waiver, which allows a bene other than the spouse to be named for any death benefit. So far, so good. But if the participant lives, then there will be a QJSA waiver also required to receive benefits in other than a QJSA form, and the spouse will have to sign off on this as well. This waiver can't be signed too far in advance - 90 or 120 days sticks in my head, but I haven't checked to see if that's correct.

[stephen]

THANK YOU!

[Trekker]

I would like to ask Belgarath a follow up question, if I may.

Concerning a participant's distribution or loan, can a plan be drafted to impose a restriction that is not required by the Code or Regs? For example, it seems that a pure profit sharing plan would not be permitted to require spousal consent for a loan. If a participant is entitled to a loan and asks for it, how can a plan impose this restriction?

Thanks.

[jpod]

There is no law that would prevent a plan from being drafted to require spousal consent to a loan, even if such consent would not be required under the QJSA rules. If such a plan required spousal consent, you'd have an operational violation if you didn't actually secure spousal consent.

[J Simmons]

A profit sharing plan that permits the P to name anyone other than his spouse as the death beneficiary as to any percent (up to 50%) without the spouse's consent is subject to spousal consent rules, despite what the plan documents might otherwise try to provide.

For a profit sharing plan that does not allow the P to name anyone other than his spouse as the death beneficiary as to any percent without the spouse's consent is generally not required by pension law to follow the spousal consent rules. But the plan documents may, as jpod, pointed out require spousal consent anyway and failure to follow such a provision voluntarily written into the plan would be an operational failure and could expose the plan trust to the possibility of having to pay part of the benefits a second time, to the spouse whose consent was not obtained before payout to the P.