QOSA on a QPSA?

[EBECatty]

I understand from Notice 2008-30 that a QOSA is not required for a QPSA, i.e., if your QPSA is a 50% survivor annuity, you don't need to offer a separate 75% QPSA survivor annuity.

I'm looking at an SPD that says, in a pre-retirement death situation, the spouse may be allowed to elect a 75% annuity if the default form of QPSA that otherwise applies is the plan's default 50% QPSA.

This language is separate from the provision regarding a participant's election of a higher survivor annuity percentage shortly before the participant's death.

Setting aside the plan document, would this election be required by law under any circumstances?

[My 2 cents]

1. Don't think that it is required by law. Plans are required to offer QOSAs as an alternative to the QJSA but not to provide (by participant or surviving spouse election) a pre-retirement death benefit more generous than the plan's QPSA, but of course plans may choose to do so.

2. Not that such things ever happen, but on the odd chance that the SPD is stating something not to be actually found in the plan document, have you verified that the plan actually provides for a pre-retirement death benefit based on presumed election of a 75% contingent annuitant option?

3. Under what circumstances is it available? I cannot imagine any reason, given the death of the participant, for anyone ever willingly choosing a 50% joint form death benefit over a 75%. No indeterminate period in which the participant's benefit would be lowered by electing the form with the bigger death benefit. Is it left up to the surviving spouse? If so, any surviving spouse who chooses to stick with the 50% benefit instead of opting for the 75% is either mentally incompetent or did not understanding the choice.

[EBECatty]

Unfortunately, you may have just confirmed all three of my concerns.

1. I can't find anything requiring such an election by law.

2. It's not in the plan document.

3. No surviving spouse in their right mind would elect a 50% annuity when a 75% annuity is freely available.

I'm trying to determine why it is in the SPD.

[Effen]

SPDs have been known to be wrong. Always look to the document for the real answer.

P.S. Plan documents have also been known to be wrong - even the big prototype vendor kind.