J&S in a Profit Sharing Plan

[52626]

Plan Sponsor offers a 401k plan and has J&S and life time options for distribution. Attorney drafted document and I am not sure why this provision was never removed. There is no MP money in the plan.

The client wants to eliminate the spousal consent for Hardships and Loans. My thought this is an all or nothing election. If they remove spousal consent for loans and hardships, then they have to remove it for distributions to a terminated participant.

do you agree?

Also does anyone know where I could get some statistics on DC plans that still require spousal consent ( using J&S) for distributions??

Thanks

[ETA Consulting LLC]

I would amend to remove the J & S from the plan. The percentages of PS plans that still have it are exceptionally low; especially after the 411(d)(6) rules were modified to allow for its removal.

Good Luck!

[BG5150]

Amend to remove J&S from the plan, but require spousal consent for whatever you'd like.

We have plans that require spousal consent for loans but not for distributions.

[MWeddell]

If the lump sum payment is the primary form of benefit payment and the annuity forms are optional, then the J&S rules only affect a profit-sharing plan once a participant affects an annuity form of payment, which occurs after loans and in-service lump sum distributions are taken. So yes, you can eliminate the spousal consent for the loans and hardships.

However, this is a matter of interpretation, not something that is crystal clear from the regulations, so I would tell the client to have legal counsel review the issue before an plan amendment is made.

[Trekker]

I have always wondered how you can impose a restriction (spousal consent) on a participant obtaining a distribution when the Plan has no pension funds at all and no QJSA options. I know it is done but can't find official justification for what seems to be a violation of the participant's right to his or her account.

No question; just a wondering.

[MWeddell]

A participant does not have a right to access his or her account without spousal consent if the plan document provides for spousal consent rules. The plan document is what establishes rights and rules.

Trying to put this into other words ... Code Section 401(a) generally is structured to provide that to be a qualified plan, one must meet the following conditions. It doesn't say that a plan can only provide for the following rules. The background rule is that the employer can put into plan document any provision that is not forbidden by Code Section 401(a) and ERISA.

[My 2 cents]

Trekker - I don't understand what you mean by saying that "...the plan has no pension funds at all...". If the plan is a profit sharing and/or 401(k), all of the funds are pension funds. The participant's account under the plan is not a savings account owned by the participant.

Every aspect of the participant's rights to his or her account is governed by the plan provisions. As MWeddell noted, while it might not be mandated that the plan require spousal consent for distributions, if the plan itself requires spousal consent then spousal consent must be obtained.

[Trekker]

Thank you both for replying.

I should have clarified that by "pension" funds I meant Money Purchase Pension funds that were either transferred or else the Plan was converted from an MPP to a PSP.

[Guest Dee401kLady]

Can you help or refer me to a summary of the rules for Qualified Joint and Survivor provisions? I have a 401(k) plan that includes J&S for distributions only and want to be sure we are ok with the process. I think in a nutshell: Participant must understand (such as on a distributions form, and with maybe an explanation notice, along with the 402(f) notice) that they may select an annuity as a form of payment. This information would apply to all participants both single and married participants. If married, the participant's spouse would need to consent to an election for a payment OTHER THAN an annuity. Does the explanation/notice (in advance of the pariticipant's payment election) HAVE TO provide details (any or specifics for the individual participant) about the annuity payment?