Subsidized Joint and Survivor

[Guest mo]

Does anyone see a problem in setting the normal form as a straight life annuity, but if a participant selects an optional 100% JSA, have the JSA subsidized so that it is the same monthly amount as the straight life annuity would have been?

[This message has been edited by mo (edited 11-22-1999).]

[david rigby]

I've seen that before, or something similar. I think it is OK as long as you have passed the "effective availability" test. Anyone else?

[KJohnson]

I agree with pax. Since its a benefit based on family status its disregarded for the current availability test--you only have to meet effective availability.

You can still meet a 401(a)(4) safe harbor for subsidized benefits because you pass current availablity.

J&S has to be at least as valuable as any other distribution option, but not vice versa so you should be o.k. there.

You would have to talk with an actuary, but the benefit seems very expensive.

[david rigby]

You might be able to accomplish the same thing by reverting to the life annuity as the normal form, but then define the conversion factors for optional forms. For example, the J&50%S form could be defined as 99% of the life annuity. The J&100%S form could be defined as 98% of the life annuity.

If you have to do any 401(a)(4) testing, then you will have to pay attention to the "most valuable" benefit, but if you have a safe harbor plan, it should not matter.