Rescinding J&S election a year after payments commence

[EPCRSGuru]

I have a stubborn married person who wants to retroactively rescind his election of a J&S annuity to get a lump sum.  Obviously the answer is no, no, a thousand times no, but I am having trouble getting through to him.  Any suggestions?

[david rigby]

Quote the plan provision that prohibits such change.

[EPCRSGuru]

I wish it were that simple.  When I say "stubborn" I mean beyond the point of all reason.

 

[david rigby]

Ultimately, it is simple:  The Plan (not the TPA/employer/anyone else) has a claim.  Treat it as such, using the plan (and SPD) terms to respond. 

This is likely a case where the PA should engage an ERISA attorney for help/advice.

[MoJo]

Give them the number of the regional office of the DOL with jurisdiction over the plan, tell them to contact a DOL benefits advisor if they believe they are being wronged by the plan, and let them deal with the participant.  The "weight" of the DOL in finding that they are not being wronged can be persuasive at times....

[fmsinc]

I don't understand.  In what way did he "elect" a QJSA.  I assume this did not happen in the context of a divorce.  If he was married at the time of his retirement such an election would have been mandatory.  Doesn't this explain it all? 

https://www.irs.gov/irm/part4/irm_04-072-009

Even in the context of a divorce, see Hopkins v.  AT & T Global Information Solutions Company, 105 F.3d 153 (4th Cir. 1997) at - https://scholar.google.com/scholar_case?case=9954117838131396049&q=hopkins+at%26T+global&hl=en&as_sdt=2,9

where the Participant's surviving spouse benefits vested in his then current spouse immediately on his retirement and was not available to a former spouse who failed to obtain a QDRO prior to such retirement giving her such survivor benefits pursuant to an award of such benefits at the time of her divorce from the Participant.

And in what sort of Plan is a lump sum payout the alternative to a QJSA? 

What am I missing?    

[david rigby]

1 hour ago, MoJo said:

Give them the number of the regional office of the DOL with jurisdiction over the plan, tell them to contact a DOL benefits advisor if they believe they are being wronged by the plan, and let them deal with the participant.  The "weight" of the DOL in finding that they are not being wronged can be persuasive at times....

Respectfully, I disagree.  This is a participant claim or looks like one.  Claim procedures are part of every plan document.  The Plan cannot avoid this by reeling in the DOL.  Follow the document!

[Adi]

5 minutes ago, david rigby said:

Respectfully, I disagree.  This is a participant claim or looks like one.  Claim procedures are part of every plan document.  The Plan cannot avoid this by reeling in the DOL.  Follow the document!

Agreed. It sounds like a benefit claim, in which case he should get a denial letter outlining Plan terms and other 2560.503-1 reqs, with right to appeal. 

[MoJo]

15 hours ago, david rigby said:

Respectfully, I disagree.  This is a participant claim or looks like one.  Claim procedures are part of every plan document.  The Plan cannot avoid this by reeling in the DOL.  Follow the document!

It is a benefits claim - and based on the OP, the participant is unwilling to accept that the plan controls.  Benefits consultants at the DOL specifically address these kinds of issues - all the time, and act as ombudsmen between participants/plan sponsors/service providers.

That is their job. - BTW, DOL benefit consultants are *not* investigators (though they can refer a matter to an investigator if warranted).  We routinely refer participants to them when a participant (usually a former employee or possibly an alternate payee) when they have issues, where the plan sponsor doesn't do what they want (but does do what they need - which is comply with the law/plan).

[Peter Gulia]

A plan’s administrator might consider both courses of action—using one’s claims procedure and (if one suspects the inquirer seems likely to continue unpleasantly) mentioning EBSA.

A written denial would include “[r]eference to the specific plan provisions on which the determination is based[.]” 29 C.F.R. § 2560.503-1(g)(1)(ii). https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-G/part-2560/section-2560.503-1#p-2560.503-1(g)(1)(ii)

If an unhappy inquirer calls EBSA (many don’t bother), a Benefits Advisor often asks the plan’s administrator to volunteer information that might help resolve an inquiry. Furnishing the written denial should make it easy for a Benefits Advisor to close the inquiry.

EBSA’s work method doesn’t call for a Benefits Advisor to evaluate the correctness of a decision; rather, the focus is on whether a plan’s administrator responded to a request for information or a claim. And if a claimant has been informed about her rights, EBSA treats that as enabling the inquirer to pursue her rights.

MoJo’s practical pointer sometimes helps when one works in a recordkeeper or TPA (especially if it is exposed to participants’ inquiries) and the relationship with the plan’s administrator isn’t close enough for the service provider to guide the administrator’s conduct.

[C. B. Zeller]

15 hours ago, fmsinc said:

In what way did he "elect" a QJSA.

I suspect this is shorthand for saying that the participant (and spouse) did not waive QJSA before the benefit commencement date, therefore the benefits commenced in the form of a QJSA on the benefit commencement date.

 

15 hours ago, fmsinc said:

And in what sort of Plan is a lump sum payout the alternative to a QJSA? 

Many defined benefit plans, especially cash balance plans, offer a lump sum as an alternative form of benefit. That's why IRC 417(e)(3) exists.

[EPCRSGuru]

Participant specifically elected a benefit that provided an annuity for his lifetime and 50% of that benefit to his spouse if she survives him.  He had the option of electing a single life annuity or a lump sum distribution with spousal consent, and did not.   He completed forms, checked 4 boxes, selected the annuity starting date, and entered the required information about his spouse.  There was nothing automatic about this process.  We have sent him our claim procedures and invited him to file.  This is going to be my first claim in 12 years.  We are curious to hear his reasons for wanting to make the switch.

As for the DOL benefit advisors who take participant complaints, I can tell you that they are very, very thorough.  I once had to provide massive amounts of documentation to prove that an early retirement benefit enhancement program did not exist.  Apparently some nameless supervisor might have hypothesized that an early retirement incentive program might someday be offered, and this participant was off to the races.  Cue a DOL inquiry that I had to respond to with payroll records, plan documents, SPDs, SARs, benefit election forms, previous letters to participant saying that such a program did not exist and was never contemplated, AND a copy of his benefit calculation.  Another DOL inquiry was to prove that working fewer than 200 hours of service in any of the applicable eligibility computation periods did not qualify as working 1,000 hours or more, which is what the plan requires for entry.  DOL complaints seem to have picked up--don't know why.