ERISA 403b plan - waiving spousal consent for RMD??

[t.haley]

Recordkeeper for ERISA covered 403b plan of tax exempt entity offering "automated" RMD processing including participant communication and automatic payout of RMD if no action taken by participant by certain date.  Recordkeeper also advising that plan can "waive" spousal consent for RMDs.  I have been unable to find any authority for this.  Anyone else have experience with this?

[Peter Gulia]

I have not read the particular plan you seek to apply or interpret.

Consider these preliminary questions and thoughts (to prepare to get your lawyer’s advice):

Does the plan allow or preclude an annuity payout option?

Does the plan provide or omit a qualified joint and survivor annuity?

What is the plan’s normal form of distribution?

Does the particular annuity contract or custodial account allow or preclude an annuity payout option?

Does the particular annuity contract or custodial account provide or omit a qualified joint and survivor annuity?

Whatever ways to have designed a plan ERISA § 205 might permit, consider the particular plan’s actual provisions. Read The Fabulous Document.

Consider: A plan designed to meet Internal Revenue Code § 403(b)(10), which refers to § 401(a)(9), need not impose an involuntary distribution on and after a participant’s required beginning date. For § 403(b) contracts, some minimum-distribution rules apply as if the § 403(b) contracts were IRAs. 26 C.F.R. § 1.403(b)-6(e)(2) https://www.ecfr.gov/current/title-26/part-1/section-1.403(b)-6#p-1.403(b)-6(e)(2). Although a required minimum is determined separately for each § 403(b) contract, a participant may take the sum of a year’s § 401(a)(9) minimum from any contract or contracts. 26 C.F.R. § 1.403(b)-6(e)(7) https://www.ecfr.gov/current/title-26/part-1/section-1.403(b)-6#p-1.403(b)-6(e)(7).

So, a plan sponsor might have designed a plan that does not impose an involuntary distribution from a § 403(b) contract held under the plan. (At least one IRS-preapproved document I’ve seen recognizes the rule cited above.)

An ERISA-governed plan’s administrator or other fiduciary might be reluctant to impose an involuntary distribution if the plan does not provide it.

“[A] fiduciary shall discharge his duties with respect to a plan . . . ; and in accordance with the documents and instruments governing the plan[.]” ERISA § 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D).

The recordkeeper’s service might be useful if a plan provides an involuntary distribution to meet I.R.C. § 401(a)(9). Otherwise, one might allow a service a participant voluntarily invokes.

This is not advice to anyone.

[t.haley]

The current plan document does not provide for a "normal" form of distribution, instead deferring to the distributions options available under the "applicable Investment Arrangement" (which I do not have access to).  The plan document does contain standard pre-retirement and retirement joint and survivor annuity distribution language.  The plan also contains language stating that it will comply with the RMD requirements of 401(a)(9) "in accordance with the terms governing each Investment Arragement" and, for purposes of distributions, each Investment Arrangment will be treated as an IRA and distributions made in accordance with 1.408-8 except as provided in 1.403(b)-6(e).

What is unclear is whether the spousal consent rules apply to RMDs specifically and, if so, whether the plan can be drafted to waive that requirement.

[Peter Gulia]

The basic plan document text you quote seems similar to the IRS-preapproved document I mentioned.

I had read that document (in my client’s situation, not yours) as omitting a plan-imposed involuntary distribution.

If the plan does not impose an involuntary distribution, a need for an ERISA § 205 qualified election against a qualified joint and survivor annuity might not arise until a participant voluntarily claims a distribution other than a QJSA when, absent a qualified election, the plan and the § 403(b) annuity contract would provide a QJSA.

Alternatively, if a participant claims a distribution from a contract that has no QJSA payout option, there might be nothing the participant need elect against.

Consider this too: If a § 401(a)-(k) plan requires an involuntary § 401(a)(9) distribution but the plan has no annuity payout option, there would be no QJSA for a participant to elect against.

What drives whether a qualified election against a QJSA is called for or excused is not whether the distribution is a minimum distribution, it’s whether the distribution is or isn’t a qualified joint and survivor annuity.

This is not advice to anyone.

[t.haley]

Thank you Peter - that is extremely helpful!