Final 411(d)(6) Regs Permit Elimination of Benefit Forms Satisfying QJ

[Guest SCUDDESLER]

Assume a pension plan satisfies the QJSA component of the QJSA/QPSA rules by providing the following benefit forms:

(1) an annuity for the life of the participant with a survivor annuity for the life of his spouse which is 50% of the amount of the annuity payable during the joint lives of the participant and spouse (the "normal form of benefit");

(2) an annuity for the life of the participant with a survivor annuity for the life of his spouse which is 60% of the amount of the annuity payable during the joint lives of the participant and spouse;

(3) an annuity for the life of the participant with a survivor annuity for the life of his spouse which is 70% of the amount of the annuity payable during the joint lives of the participant and spouse; and

(4) a lump sum distribution which is actuarially equivalent to the normal form of benefit.

As I read the final regulations under 411(d)(6) which were issued last week, the plan could be amended to eliminate, for example, all benefit options except (1) and not violate the Code's anticutback rule. Alternatively, the plan could be amended to eliminate (1), (2), and (4), without violating the anticutback rule. Is it true that any combination of optional benefit forms may now be eliminated so long as the plan retains one benefit form that satisfies the QJSA rule?

[M R Bernardin]

Under the final regs, only defined contribution plans can eliminate optional forms of payment. I believe there is another provision in the regs, not affected by the new final regs, that allows plans to eliminate J&S annuities other than the greatest and least, but that may be limited to defined contribution plans as well.

[david rigby]

That is correct. Here is a link to the reg, but I could not get it to ever connect. http://www.access.gpo.gov/nara/cfr/waisidx...6cfr1v5_99.html

See Reg. 1.411(d)-4 Q&A2(B)(2)(ii).