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Spouse Refuses to Consent


Guest LHart

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We have a terminated 403(b) plan with annuity options. A participant who is in the process of divorce cannot get her spouse to consent to a distribution. The distribution forms specifically state that spousal consent is required. The financial institution will not distribute without spousal consent.

What can be done in this situation? What are the rules?

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LHart, one deduces from your query that the plan provides, in the absence of a qualified election with the spouse's consent, a qualified joint and survivor annuity.

Is there some reason why the plan's administrator is reluctant to deliver to the participant an annuity contract?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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We have a terminated 403(b) plan with annuity options. A participant who is in the process of divorce cannot get her spouse to consent to a distribution. The distribution forms specifically state that spousal consent is required. The financial institution will not distribute without spousal consent.

What can be done in this situation? What are the rules?

Short answer: If the participant is a party to a divorce then the 403b benefit will be part of the martial property subject to division by the court where the rights of both parties will be decided. If the court gives the annuity to the participant then the court can order the other spouse to grant consent to the distribution as a condition of the divorce under its contempt of court powers. The participant should consult his/her attorney.

mjb

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As I see it...

The financial institution will not distribute without spousal consent.

As well it shouldn't!

If you can't get spousal consent, then the plan must buy an annuity that pays the participant a lifetime benefit and the (to-be-ex) spouse whatever the appropriate fraction is at the participant's death. That may not be what either of them want for lots of reasons, so if they don't want that to happen, then they must agree to let the participant do a rollover to an IRA and at the same time agree to split the IRA later (assuming there's not enough time to split the account before the termination is completed). I don't think it should be that complicated but I'm sure there will be lots of panic and fee-charging by both attorneys.

If the court gives the annuity to the participant then the court can order the other spouse to grant consent to the distribution as a condition of the divorce under its contempt of court powers.

I'm pretty sure that the plan termination wants to happen way before the settlement is finalized

Ed Snyder

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As I see it...
If the court gives the annuity to the participant then the court can order the other spouse to grant consent to the distribution as a condition of the divorce under its contempt of court powers.

I'm pretty sure that the plan termination wants to happen way before the settlement is finalized

Since the annuity is already part of the marital estate subject to division in divorce, the participant could request court permission to rollover the distribution to an IRA or request a distribution of an annuity contract and the court will order the spouse to give consent to the distribution. In both cases the court would then determine how the parties would divide up the IRA or annuity under state divorce law. The court could also allow the participant to retain the annuity contract and give other property to the spouse.

mjb

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The financial institution that issued the 403(b) annuity should be willing to treat the participant's existing annuity contract as a distributed annuity for plan termination purposes. In other words, the participant's existing annuity can be "spun-off" and will be treated as a mini-403(b) plan with the participant as the plan sponsor. The QJSA rules will continue to apply. If the annuity is a group annuity, the financial institution will probably issue a certificate to the participant, but if the annuity is an individual annuity, the financial institution may not issue anything. By using a distributed annuity, the plan can be terminated and the spouses can work out thier property settlement at their own pace. Talk to the financial institution about issuing plan termination distributed annuities.

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