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DB Order doesn't allow JSA


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We received a separate interest Order for our Pension (Defined Benefit) plan that allows the Alternate Payee to elect any form of benefit available under the plan an applicable law except that "the Alternate Payee may not elect a joint and survivor annuity where her current spouse, at the time of election, is designated to be the surviving spouse."

Have you seen this?  Is there any issue with accepting the Order as a QDRO with this language that limits the Alternate Payee's distribution options?

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Are you sure that it doesn't say that the option cannot be a qualified joint and survivor annuity with the alternate payee's spouse as the spouse?

If the plan allows the election of a joint and survivor option where the joint annuitant is not restricted to the spouse, it's a bit shakier to prohibit selection of a joint form with the alternate payee's current spouse as joint annuitant.  However, wouldn't it seem a bit questionable to require the participant to forego some of his or her benefits in order to not only pay benefits to the ex-spouse who left them but also to provide survivor benefits to the person who stole the spouse away?  As I recall, it is permissible to restrict such options with respect to the alternate payee, at least under some circumstances.

Always check with your actuary first!

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5 minutes ago, My 2 cents said:

Are you sure that it doesn't say that the option cannot be a qualified joint and survivor annuity with the alternate payee's spouse as the spouse?

If the plan allows the election of a joint and survivor option where the joint annuitant is not restricted to the spouse, it's a bit shakier to prohibit selection of a joint form with the alternate payee's current spouse as joint annuitant.  However, wouldn't it seem a bit questionable to require the participant to forego some of his or her benefits in order to not only pay benefits to the ex-spouse who left them but also to provide survivor benefits to the person who stole the spouse away?  As I recall, it is permissible to restrict such options with respect to the alternate payee, at least under some circumstances.

As I read it, the language has to do with what form of benefit the AP can choose with respect to the AP's separate interest.  It is basically saying the AP can choose any form of benefit except the AP cannot choose a JSA and name her current spouse as the survivor.

This shouldn't affect the Participant's separate interest in any way.  Once the account has been divided between the AP and Participant, whatever form the AP chooses shouldn't have any affect on the Participant's account.

So I guess the question is, can the Order limit AP's form of payment election options once the account has been divided?

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This language has its origin in IRC 414(p)(4)(A)(iii).

 

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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While it can be argued that allowing the alternate payee to elect a joint form with the alternate payee's new spouse as joint annuitant would not "affect the Participant's separate interest in any way", I suspect that the exception in 414(p)(4)(A)(iii) that permits the plan to not allow the alternate payee to elect such a joint form is there because requiring that the Participant stand by and watch the ex-spouse elect an option that benefits the (to use an old-fashioned term) home wrecker to whom the alternate payee is now married, using benefits that the Participant had in fact earned, could be highly offensive to the Participant.

Always check with your actuary first!

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Well, that's part of it.  Also, note the purpose of a DB retirement annuity is to provide a retirement income for the lifetime of the participant, with limited survivor benefits (primarily the spouse).

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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A domestic relations order can qualify if it limits the AP's choices of form of benefit.

An order will not qualify if it provides for a form of benefit that is not offered by the plan.

A defined benefit plan offers a J&S annuity with respect to the spouse of the payee (generally, the participant). The statute cited by Mr. Rugby is a special rule that allows  a DB plan to disallow a J&S annuity to an AP despite the statutory requirement to offer a QJSA form of benefit for reasons alluded to by Mr. Rigby.  If a DB plan offers a J&S annuity beyond the statutory requirement, the order can still limit the form of benefit to the AP.  A lot of orders are thoughtlessly drafted with the statutory language regurgitated by the incompetent drafter, usually the AP's lawyer.  So be it; that is the AP's problem and the plan would prefer to pay the AP in a form other than a J&S annuity in any event.

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