Spouse as beneficiary

[austin3515]

Got a call from an advisor who has a participant insisting that if the spouse is the 60% beneficiary than the other 40% can go to someone else. I'm sure it is not true but was wondering if someone reads this and says "oh yeah, they are thinking of governmental 457(b) accounts attributable to pre-1982 accumulations in their after-tax balances" or something equally obscure (my example is fictitious of course).

If anyone knows it is one of you...

[rcline46]

What kind of plan, and is it subject to QPSA rules? If subject to QPSA, then he is probably correct (more info needed). If NOT subject to QPSA, then just naming spouse as 50% or more does NOT work.

[david rigby]

What does the plan say?

[austin3515]

This plan is NOT subject to any QJSA or QPSA stuff. I'm not looking for what this plan says. I'm only trying to determine if this person is talking about something where I can say to them "you're thinking of the QPSA rules, but those rules do not apply to this plan." Is that a QPSA rule, where the participant can name 50% for the spouse and 50% for anyone else? The thought being the spouse gets her half - it's the participant's half that is being assigned elsewhere? If yes, I think this is what is being referred to.

[rcline46]

Austin - start with the rules for how a dc plan escapes the J&S rules. Pension plans (DB, MP, etc) cannot escape the rules.

The rule I am focused on is that the spouse MUST be the 100% beneficiary UNLESS the spouse consents.

If subject to J&S (and QPSA), then the spouse is only 50% bene, the other 50% can be directed as the participant directs.

However, if NOT subject to the rules, the participant cannot say 50% to spouse and direct the rest else where without spousal consent.

[masteff]

Got a call from an advisor who has a participant insisting that if the spouse is the 60% beneficiary than the other 40% can go to someone else.

The first thing that comes to my mind is a "term certain". Could I take, for example, a 60% J&S with 10-yr certain, then my spouse would get 60% and someone else could get any remainder of the 10-yr certain? If so, the advisor needs to simply be told that not all plans have the same distribution options.

EDIT: Or perhaps they need to be told that not all pensions are term certain. And that there is no other "40%" to be given elsewhere because of actuarial equivalence over the combined lives of the J&S.

[rcline46]

What is missing here is the plan document. What does it say are the distribution options? The advisor needs that to even begin to answer the questions.

[austin3515]

My question wasn't "how do I handle this situation in my plan" it was "what is this person thinking of?", hence the plan document is not necessary for this discussion. I knew it was not gong to be an option that was available, I was just trying to give a better answer re: why it could not be done. And now I know!

[jpod]

Unless prohibited by the plan, there is nothing in the law that would prevent a participant from naming the spouse as 60% beneficiary and X as 40% beneficiary provided that the spouse consents to this.

[FormsRstillmylife]

Under a money purchase defined contribution plan, the plan must provide QJSA and QPSA. The spouse has a right to 50% of the account paid as a QPSA.