Death after benefit election but before ASD

[CuseFan]

Why do my colleagues save up their questions for Friday?

Participant in DBP makes a valid election - assume lump sum, and all the forms are properly completed and submitted - for an annuity starting date of 10/1, but the participant dies today (9/29). Unless the Plan states otherwise (which I've seen, but rarely), I believe the QPSA provisions of the Plan apply and the benefit election is moot. Furthermore, I think Plan language is fairly explicit that if the Participant dies prior to the ASD his/her surviving spouse gets QPSA. My colleagues were thinking election should be honored.

[jpod]

Why do they think that?  And, even if under some theory it was felt that the entire benefit should be paid, under what theory could you deny the surviving spouse the legally-required QPSA, and who would receive the balance in excess of the QPSA?

[CuseFan]

i guess their thought was that the surviving spouse would get the (100%) lump sum so the QPSA is satisfied - which may be true, although when does someone designate a beneficiary for a lump sum? - and their opinion is that the spouse already signed off. However, that waiver was for the QJSA, not the QPSA, and I also think the plan is then paying out more than it should. Thanks for your input.

[My 2 cents]

1 hour ago, jpod said:

Why do they think that?  And, even if under some theory it was felt that the entire benefit should be paid, under what theory could you deny the surviving spouse the legally-required QPSA, and who would receive the balance in excess of the QPSA?

1.  Some plans explicitly call for elections to be followed in the event of the participant's death.  Some plans explicitly call for the lump sum value of the accrued benefit to be payable if the participant dies before commencement (as coordinated with any benefits payable to the spouse).

2.  If this is a defined benefit plan, the spouse will have already signed a waiver (witnessed by a notary) waiving all rights to spousal benefits, so the surviving spouse could not still seek the QPSA (unless the election is nullified by the participant's death prior to the commencement date).

3.  If this is a defined contribution plan, isn't the entire balance required to be paid out in the event of the death of the participant prior to the benefit start date?  But I see from the original post that this is a defined benefit plan.

4.  Even in a DB plan, there should not be duplication in the death benefits to be paid out.

[CuseFan]

I have seen plans that say if the participant has made a valid election for an optional form but dies prior to the ASD that the election is honored, or the actuarial equivalent of the benefit (100%) gets paid - but most plans say if the participant dies before benefits commence (i.e., ASD) that the QPSA rules apply, which would nullify any elections that may have been made.

1 hour ago, My 2 cents said:

If this is a defined benefit plan, the spouse will have already signed a waiver (witnessed by a notary) waiving all rights to spousal benefits, so the surviving spouse could not still seek the QPSA (unless the election is nullified by the participant's death prior to the commencement date).

The waiver is specifically for the QJSA, so pre-retirement spousal rights are not waived/consented. If a spouse signed a consent to a QPSA waiver and then the participant retired shortly thereafter they would still need to execute QJSA waiver/consent for something other than the J&S. 

Unless the plan explicitly says differently, i think the QPSA provisions trump the participant elections if (s)he does not survive to the ASD.

[jpod]

I agree with you about the QPSA.  So, then we are left with the question of whether anyone has a claim to the other piece of the accrued benefit.  Based on the terms of the plan as you described, I don't think the plan is liable for that other piece.