Pammie57 Posted April 14, 2022 Posted April 14, 2022 A terminated participant has an account balance with a client 401k plan that exceeds $5000. I have looked through the document several times for guidance. All I see if forms with signature lines for participant and plan sponsor. Q: If the balance is over $5000 and it (plan) is not subject to QJ&S annuity rules - does the distribution form have to be signed/approved by the spouse? Or is that something the plan sponsor can decide arbitrarily? The platform says they are set up to require spousal consent, but I don't see anything in plan document. Thanks for any feedback. They are holding up the distribution for this..
Bri Posted April 14, 2022 Posted April 14, 2022 Check your language on participant benefit elections. If there's any reference to the requirement that the election be made on a form "approved by the Administrator" or words to that effect, that could be something that allows the Plan Administrator to require it. (Perhaps an attorney wants to chime in that requiring spousal consent places an undue burden on a participant with a valid claim for benefits.)
Bird Posted April 15, 2022 Posted April 15, 2022 16 hours ago, Bri said: (Perhaps an attorney wants to chime in that requiring spousal consent places an undue burden on a participant with a valid claim for benefits.) Not an attorney but if anyone is asking for spousal consent when it is not required, they should find another line of work. And I do not believe that language about a form being "approved by the Administrator" extends to adding language contrary to the terms of the plan. Ed Snyder
fmsinc Posted April 15, 2022 Posted April 15, 2022 Internal Revenue Manual Section 4.72.9.3.5 et seq. provides: "4.72.9.3.5 (04-01-2006) Spousal Consent Rules REA added the requirement of spousal consent before a participant may take a distribution so that the non-employee spouse would have some control over the form of benefit the participant chooses and would at the very least be aware that retirement benefits existed. Spousal consent: Isn’t required for distributions made in the form of a QJSA. See 26 CFR 1.401(a)-20, Q&A 17. Is required all times for benefits paid in a form other than a QJSA, even when payments are no longer immediately distributable. 4.72.9.3.5.1 (02-26-2015) Exceptions to Spousal Consent Rules See exceptions to the spousal consent rule for distributions in CFR 1.417(e)-1(b)(2) and CFR 1.401(a)-20, Q&A 27, and as follows: For distributions made on or after October 17, 2000, a spouse’s consent isn’t required if the present value of the participant’s non-forfeitable accrued benefit, including both employer and employee contributions, on the date of the distribution is ≤ $5,000. If the plan administrators are satisfied there is no spouse or the spouse can’t be located. If the participant has been abandoned (and the participant has a court order to this effect), or is legally separated. For an incompetent spouse, the legal guardian can provide consent, even if the legal guardian is the participant. The plan must make minimum distributions, per IRC 401(a)(9) even though the employee, or spouse where applicable, fail to consent to the distribution. 26 CFR 1.401(a)(9)-8, Q&A 4." What would be the legal basis for a Plan modifying these rules for a still employed Participant or for a terminated Participant?
Bird Posted April 18, 2022 Posted April 18, 2022 On 4/15/2022 at 5:07 PM, fmsinc said: Internal Revenue Manual Section 4.72.9.3.5 et seq. provides Misleading, spectacularly so, without context below. 4.72.9.2 (02-26-2015) Plans Covered by Survivor Annuity Requirements The QJSA/QOSA/QPSA requirements apply to all DB plans and any defined contribution plan to which IRC 412 applies (such as money purchase plans). See IRC 401(a)(11). Nate S 1 Ed Snyder
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