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QJSA Spousal Consent in DC Plans


ERISAAPPLE

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I want to make sure my understanding of the QJSA rules for DC plans is accurate.  As I read Rev. Rul. 2012-3, if a plan offers a single life annuity or a QJSA as the default form of distribution in the absence of a participant election, and also offers a lump sum, spousal consent is not required if the participant elects the lump sum prior to the participant's annuity starting date.  Assume the plan has no annuity investments, and thus, e.g., Situation 2 in Rev. Rul. 2012-3 would not apply.    

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My understanding is that if a PS plan offers an annuity option, it is subject to QJSA rules, period.  As I skimmed that RR, it seemed to cover situations where a plan did not offer annuity options as part of the plan document but certain options were available as investments that provided annuity options. 

I could be wrong and I'm sure I'll find out quickly enough if so!

Ed Snyder

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That used to be my understanding too - if the plan offers the annuity, spousal consent is required, period.  I am reconsidering that position.  It seems my new conclusion is supported by the analysis of the Revenue Ruling.  I'm not sure a distribution option under the investment and the options provided by the plan can be distinguished.  Why would the QJSA rules apply to the plan in the Revenue Ruling at all, if the plan does not offer annuities?    The election would be under the annuity contract, not the plan.  How can a participant elect an annuity the plan does not offer?

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Another tidbit.

An internal Revenue manual I found on the internet suggests my conclusion is accurate.  If the plan offers an annuity, how could the QJSA rules not apply to some participants and not others?  I don't know, however, if this is the current manual.

4.72.9.2.1 (02-26-2015)

IRC 401(a)(11)(B)(iii)

  1. IRC 401(a)(11)(B)(iii) provides that the QJSA/QPSA requirements apply to any participant under any defined contribution plan, even if the plan is not subject to the funding standards of IRC 412, unless the plan:

    1. Provides that the participant’s spouse must be entitled to the full non-forfeitable account balance upon the participant’s death.

    2. Does not offer a life annuity, or the participant does not elect a life annuity.

    3. With respect to a participant is not a transferee plan that is subject to the survivor annuity requirements, or there is an acceptable separate accounting between transferred benefits and any other benefits under the plan.

      Note:

      For purposes of the two conditions in b and c above, the QJSA and QPSA rules may apply to some participants and not others.

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What do you mean by "normal" form of payment?  As I understand things, the normal form of benefit is a DB concept under 411(a)(7)(A)(i).  It is used as a measure to value the benefit.  Under 411(a)(7)(A)(ii), the value is the account balance.  I admit my understanding of this could be mistaken.

If by "normal" form you mean the default election, that would not consistent with Rev. Rul. 2012-3, because in that Rev. Rul. the default election is a life annuity.  Even so, the ruling says the QJSA rules do not apply even with the default annuity unless the participant expressly elects the annuity option.    

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On 2/16/2018 at 10:14 AM, ERISAAPPLE said:

Does not offer a life annuity, or the participant does not elect a life annuity.

I'm not convinced; I think the language above taken all by itself is misleading - to not elect a life annuity a participant must waive the J&S and get spousal consent. 

Ed Snyder

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