Spousal Consent + RMD

Is spousal consent required to process an RMD?  I have one being held up by the custodian, due to needing spousal consent. 

Thanks in advance, and if you could let me know where in the regs I can pull the info I'd appreciate it!

It depends, is the Plan subject to the QJSA annuity rules? If so you need spousal consent to pay in a form other than the normal annuity form of benefit to pay in cash. But one way or another the payments need to start to satisfy the RMD rules.

First, confirm that the plan has a QJSA as the default.  Custodians often ask for consent "to be safe" when it is not needed.  You don't say what kind of plan it is.

Second, the regs (Treas. Reg. 1.401(a)(9)-8, Q&A 4) say you have to do the RMD no matter what, but the hangup is that you'd have to start QJSA payments.  Almost nobody wants that.  If it's a DB plan,  I think that the RMD can be structured so it is effectively a QJSA but I'm a little out of my depth on that.

38 minutes ago, Bird said:

First, confirm that the plan has a QJSA as the default.  Custodians often ask for consent "to be safe" when it is not needed.  You don't say what kind of plan it is.

Second, the regs (Treas. Reg. 1.401(a)(9)-8, Q&A 4) say you have to do the RMD no matter what, but the hangup is that you'd have to start QJSA payments.  Almost nobody wants that.  If it's a DB plan,  I think that the RMD can be structured so it is effectively a QJSA but I'm a little out of my depth on that.

Sorry, it's a 401(k) Plan

Many 401(k) Plans are not subject to the QJSA rules but that's generally an election in the document. What does the document say?

One thing on this topic I never had fully spelled out -

Let's say the guy has a 250,000 account balance and the RMD would be 10,000.

If the plan is subject to QJSA and there's no consent, does the plan then take 10,000 and buy a taxable annuity?  So the participant gets a 1099 for 10,000 in taxable income up front, but the annuity provider will then return to him some smaller monthly amount, maybe 100 a month, for the rest of his+spouse's lifetimes?  (With those subsequent payments then no longer subject to further taxes since they were part of the annuity purchase.)

The plan can't self-insure the QJSA so what's an alternate process for this situation?

14 hours ago, Bri said:

One thing on this topic I never had fully spelled out -

Let's say the guy has a 250,000 account balance and the RMD would be 10,000.

If the plan is subject to QJSA and there's no consent, does the plan then take 10,000 and buy a taxable annuity?  So the participant gets a 1099 for 10,000 in taxable income up front, but the annuity provider will then return to him some smaller monthly amount, maybe 100 a month, for the rest of his+spouse's lifetimes?  (With those subsequent payments then no longer subject to further taxes since they were part of the annuity purchase.)

The plan can't self-insure the QJSA so what's an alternate process for this situation?

I take a much more draconian position. If an annuity must be purchased then the entire benefit is used to purchase it. Ouch.

Bri, the rule Bird points us to distinguishes between a plan that provides a survivor annuity and a plan that need not and does not provide a survivor annuity:

. . . .  If, because of [Internal Revenue Code of 1986] section 401(a)(11)(B), the plan is not required to distribute in the form of a QJSA to an employee or a QPSA to a surviving spouse, the plan may distribute the required minimum distribution amount to satisfy section 401(a)(9) and the consent requirements of sections 411(a)(11) and 417(e) are deemed to be satisfied if the plan has made reasonable efforts to obtain consent from the employee (or spouse if applicable) and if the distribution otherwise meets the requirements of section 417.

26 C.F.R. § 1.401(a)(9)-8/Q&A-4 (emphasis added) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401(a)(9)-8.

An individual-account retirement plan (if not subject to funding standards, and not a transferee of such a plan) need not allow an annuity, nor even any periodic payout option.

I see many plans that allow a participant a choice only between a voluntary single-sum distribution of the entire account balance and an involuntary distribution (only once a year) of the minimum-distribution amount.

There is no participant or spousal consent required to pay an RMD. See 1.411(a)-11(c)(7). 

Once a distribution is no longer immediately distributable (at later of NRA or 62), a plan may distribute the benefit in the form of a QJSA in the case of a benefit subject to 417, or in the normal form in other cases without consent. See 1.411)(a)-11(c)(4).