Should i waive qjsa

One of the important decisions a business owner must face is when and how to step out of the business — in other words, business succession planning. Losing a spouse is a stressful transition. And the added pressure of having to settle the estate and organize finances can be overwhelming.

Fortunately, there are steps you can take to make dealing with these. As the cost of a college education continues to climb, many grandparents are stepping in to help.

This trend is expected to accelerate as baby boomers, many of whom went to college, become grandparents and. Planning on working during retirement?

An increasing number of employees nearing retirement plan to work at least some period of time during their retirement years. Why work during retirement? Box Raleigh, NC Pension Options: Traditional Pension Plans. Some other factors to consider include: Health and life expectancy of your spouse: If your spouse is in poor health or has a short life expectancy, selecting the single life annuity may make more sense than selecting the QJSA.

As the plan participant and the surviving spouse, you would have the benefit of the higher monthly payout from the single life annuity for the rest of your life. Other sources of retirement income: If you or your spouse have other assets that can provide sufficient income for your spouse after your death, it may make sense to waive the QJSA and choose the larger single life annuity benefit.

If your spouse is considerably younger than you, his or her longer life expectancy will be factored into the calculation of the QJSA benefit, resulting in smaller monthly payments. But again, caution is necessary—if you select a single life annuity and you die soon after retiring, your spouse may have to survive financially without the benefit of your pension for a long period of time. Your gender: If you the plan participant are female, then selecting the single life annuity may make more sense than selecting the QJSA.

The reason: All other factors being equal, women are statistically more likely to outlive men of the same age. You will benefit from the higher monthly payout under the single life annuity while you are alive. By contrast, if you select the QJSA and your spouse dies first, you may be stuck with a smaller payout for the rest of your life.

For example, some pension plans have a cost-of-living adjustment COLA feature that allows the monthly benefits to be periodically increased to keep pace with the rate of inflation. This could be a valuable benefit for your spouse following your death. This gives you flexibility to adapt if things do not go as planned. If your pension plan offers this option, it may be better to initially select the QJSA.

Annuity benefits, like other fixed income payments, can be eroded by inflation. Your lump sum can generally be rolled over into an IRA where it can continue to enjoy the benefit of tax-deferred earnings. Your plan administrator will calculate this amount for you.

A lump sum allows you to potentially leave funds to your heirs or to a charity. Some pension plans satisfy their benefit obligation by purchasing an annuity for you from an insurance company.

Others will not purchase an annuity, but will pay your pension benefit directly out of plan assets instead. But in the event of bankruptcy, there may not be enough assets to pay all promised benefits. You can use all or part of your lump sum to purchase an annuity. Disadvantages of selecting a lump-sum payout Disadvantages of selecting a lump sum include: You may be tempted to use the funds without incorporating your withdrawals into a comprehensive retirement income strategy.

Investment losses, especially in your early years of retirement, could also cause you to experience a retirement income shortfall. You may underestimate life expectancies for you or your spouse, causing you to run out of funds too early. Some employers tie eligibility for retiree health coverage to the pension payment—if you choose a lump sum, you could lose your retiree health coverage.

Maximizing your pension with life insurance As discussed earlier, under most pension plans and depending on various factors such as the age of the two spouses , a single life annuity will pay out substantially more per month than a QJSA. Period certain: This option is generally a single life annuity combined with a guarantee period. If you die before a specified period of time usually 5, 10, or 15 years payments will continue to your beneficiary until the end of the guarantee period.

A The QPSA is calculated as of the earliest retirement age if the participant dies before such time, or at death if the participant dies after the earliest retirement age. The plan must make reasonable actuarial adjustments to reflect a payment earlier or later than the earliest retirement age. A defined benefit plan may provide that the QPSA is forfeited if the spouse does not survive until the date prescribed under the plan for commencement of the QPSA i. Similarly, if the spouse survives past the participant 's earliest retirement age or other earlier QPSA distribution date under the plan and elects after the death of the participant to defer the commencement of the QPSA to a later date, a defined benefit plan may provide for a forfeiture of the QPSA benefit if the spouse does not survive until the deferred commencement date.

The account balance in a defined contribution plan may not be forfeited even though the spouse does not survive until the time the account balance is used to purchase the QPSA. Q What preretirement survivor annuity benefits must a defined contibution plan subject to the survivor annuity requirements of sections a 11 and provide? A A defined contribution plan that is subject to the survivor annuity requirements of sections a 11 and must provide a preretirement survivor annuity with a value which is not less than 50 percent of the nonforfeitable account balance of the participant as of the date of the participant 's death.

If a contributory defined contribution plan has a forfeiture provision permitted by section a 3 A , not more than a proportional percent of the account balance attributable to contributions that may not be forfeited at death for example , employee and section k contributions may be used to satisfy the QPSA benefit. Thus, for example , if the QPSA benefit is to be provided from 50 percent of the account balance, not more than 50 percent of the nonforfeitable contributions may be used for the QPSA.

A Prior to the later of the time the plan allows the participant to waive the QPSA or provides notice of the ability to waive the QPSA, a defined benefit plan may not charge the participant for the cost of the QPSA by reducing the participant 's plan benefits or by any other method. The preceding sentence does not apply to any charges prior to the first plan year beginning after December 31, A charge for the QPSA that reasonably reflects the cost of providing the QPSA will not fail to satisfy section even if it reduces the accrued benefit.

A a In the case of a defined benefit plan , the plan must permit the surviving spouse to direct the commencement of payments under QPSA no later than the month in which the participant would have attained the earliest retirement age. However, a plan may permit the commencement of payments at an earlier date. Q Must a defined benefit plan obtain the consent of a participant and the participant 's spouse to commence payments in the form of a QJSA in order to avoid violating section or b?

For example , assume a plan has a normal retirement age of If an actuarial increase would be required under section because of deferred commencement and the increase would cause the benefit to exceed the applicable limit under section , the plan may commence payment of a QJSA at age 55 without the participant 's election or consent and without the spouse 's concent.

Q What are the rules under sections a 11 and applicable to plan loans? A a Consent rules. Consent is required even if the accrued benefit is not the primary security for the loan. No spousal consent is necessary if, at the time the loan is secured, no consent would be required for a distribution under section a 2 B.

The spousal consent must be obtained no earlier than the beginning of the day period that ends on the date on which the loan is to be so secured. The consent is subject to the requirements of section a 2. Therefore, the consent must be in writing, must acknowledge the effect of the loan and must be witnessed by a plan representative or a notary public.

Similarly, in the case of a participant who secured a loan while unmarried, no consent is required at the time of a setoff of the loan against the accrued benefit even if the participant is married at the time of the setoff. For purposes of obtaining any required spousal consent, any renegotiation, extension, renewal, or other revision of a loan shall be treated as a new loan made on the date of the renegotiation, extension, renewal, or other revision. For purposes of determining the amount of a QPSA or QJSA , the accrued benefit of a participant shall be reduced by any security interest held by the plan by reason of a loan outstanding to the participant at the time of death or payment , if the security interest is treated as payment in satisfaction of the loan under the plan.

A plan may offset any loan outstanding at the participant 's death which is secured by the participant 's account balance against the spousal benefit required to be paid under section a 11 B iii. Q How do the survivor annuity requirements of sections a 11 and apply with respect to participants who are not married or to surviving spouses and participants who have a change in marital status?

A a Unmarried participant rule. Plans subject to the survivor annuity requirements of sections a 11 and must satisfy those requirements applicable to QJSAs with respect to participants who are not married. A QJSA for a participant who is not married is an annuity for the life of the participant.

Thus, an unmarried participant must be provided the written explanation described in section a 3 A and a single life annuity unless another form of benefit is elected by the participant. An unmarried participant is deemed to have waived the QPSA requirements. This deemed waiver is null and void if the participant later marries. If a participant is married on the date of death, payments to a surviving spouse under a QPSA or QJSA must continue even if the surviving spouse remarries.

Nevertheless, for purposes of the preceding sentence, a participant and the participant 's spouse must be treated as married throughout the one-year period ending on the participant 's annuity starting date even though they are married to each other for less than one year before the annuity starting date if they remain married to each other for at least one year.

See section d 2. If a plan adopts the one-year rule provided in section d , the plan must treat the participant and spouse who are married on the annuity starting date as married and must provide benefits which are to commence on the annuity starting date in the form of a QJSA unless the participant with spousal consent elects another form of benefit.

The plan is not required to provide the participant with a new or retroactive election or the spouse with a new consent when the one-year period is satisfied.

If the participant and the spouse do not remain married for at least one year , the plan may treat the participant as having not been married on the annuity starting date. In such event, the plan may provide that the spouse loses any survivor benefit right; further, no retroactive correction of the amount paid the participant is required. Plan X provides that participants who are married on the annuity starting date for less than one year are treated as unmarried participants.

Participant A was married 6 months prior to the annuity starting date. Plan X must treat A as married and must commence payments to A in the form of a QJSA unless another form of benefit is elected by A with spousal consent.

If a participant divorces his spouse prior to the annuity starting date , any elections made while the participant was married to his former spouse remain valid, unless otherwise provided in a QDRO, or unless the participant changes them or is remarried. If a participant dies after the annuity starting date , the spouse to whom the participant was married on the annuity starting date is entitled to the QJSA protection under the plan.

The spouse is entitled to this protection unless waived and consented to by such spouse even if the participant and spouse are not married on the date of the participant 's death, except as provided in a QDRO. Q In the case of a defined contribution plan not subject to section , does the requirement that a participant 's nonforfeitable accrued benefit be payable in full to a surviving spouse apply to a spouse who has been married to the participant for less than one year?

A A plan may provide that a spouse who has not been married to a participant throughout the one-year period ending on the earlier of a the participant 's annuity starting date or b the date of the participant 's death is not treated as a surviving spouse and is not required to receive the participant 's account balance. If it is established to the satisfaction of a plan representative that there is no spouse or that the spouse cannot be located, spousal consent to waive the QJSA or the QPSA is not required.

If the spouse is legally incompetnent to give consent, the spouse 's legal guardian, even if the guardian is the participant , may give consent. Also, if the participant is legally separated or the participant has been abandoned within the meaning of local law and the participant has a court order to such effect, spousal consent is not required unless a QDRO provides otherwise.

Similar rules apply to a plan subject to the requirements of section a 11 B iii I. Q Does consent contained in an antenuptial agreement or similar contract entered into prior to marriage satisfy the consent requirements of sections a 11 and ? An agreement entered into prior to marriage does not satisfy the applicable consent requirements , even if the agreement is executed within the applicable election period. Q If a participant 's spouse consents under section a 2 A to the participant 's waiver of a survivor annuity form of benefit , is a subsequent spouse of the same participant bound by the consent?

A consent under section a 2 A by one spouse is binding only with respect to the consenting spouse. Q Does the spousal consent requirement of section a 2 A require that a spouse 's consent be revocable?

A plan may preclude a spouse from revoking consent once it has been given. Alternatively, a plan may also permit a spouse to revoke a consent after it has been given, and thereby to render ineffective the participant 's prior election not to receive a QPSA or QJSA. A participant must always be allowed to change his election during the applicable election period. A a Specific beneficiary.

Both the participant 's waivers of a QPSA and QJSA and the spouse 's consents thereto must state the specific nonspouse beneficiary including any class of beneficiaries or any contingent beneficiaries who will receive the benefit. Thus, for example , if spouse B consents to participant A's election to waive a QPSA, and to have any benefits payable upon A's death before the annuity starting date paid to A's children, A may not subsequently change beneficiaries without the consent of B except if the change is back to a QPSA.

If the designated beneficiary is a trust , A's spouse need only consent to the designation of the trust and need not consent to the designation of trust beneficiaries or any changes of trust beneficiaries. Both the participant 's waiver of a QJSA and any required spouse 's consent thereto must specify the particular optional form of benefit.

The participant who has waived a QJSA with the spouse 's consent in favor of another form of benefit may not subsequently change the optional form of benefit without obtaining the spouse 's consent except back to a QJSA. Of course, the participant may change the form of benefit if the plan so provides after the spouse 's death or a divorce other than as provided in a QDRO. A participant 's waiver of a QJSA and any required spouse 's consent thereto made prior to the first plan year beginning after December 31, , is not required to specify the optional form of benefit.

A participant 's waiver of a QPSA and the spouse 's consent thereto are not required to specify the optional form of any preretirement benefit. Thus, a participant who waives the QPSA with spousal consent may subsequently change the form of the preretirement benefit , but not the nonspouse beneficiary , without obtaining the spouse 's consent.

After the participant 's death, a beneficiary may change the optional form of survivor benefit as permitted by the plan. A general consent permits the participant to waive a QPSA or QJSA , and change the designated beneficary or the optional form of benefit payment without any requirement of further consent by such spouse.

No general consent is valid unless the general consent acknowledges that the spouse has the right to limit consent to a specific beneficiary and a specific optional form of benefit , where applicable, and that the spouse voluntarily elects to relinquish both of such rights.

Notwithstanding the previous sentence, a spouse may execute a general consent that is limited to certain beneficiaries or forms of benefit payment. A general consent, including a limited general consent, is not effective unless it is made during the applicable election period. Q What rules govern a participant 's waiver of the spousal benefit under section a 11 B? A a Application. In the case of a defined contribution plan that is not subject to the survivor annuity requirements of sections a 11 and , a participant may waive the spousal benefit of section a 11 B iii if the conditions of paragraph b are satisfied.

In general, a spousal benefit is the nonforfeitable account balance on the participant 's date of death. In general, the same conditions , other than the age 35 requirement , that apply to the participant 's waiver of a QPSA and the spouse 's consent thereto apply to the participant 's waiver of the spousal benefit and the spouse 's consent thereto. Thus, the participant 's waiver of the spousal benefit must state the specific nonspouse beneficiary who will receive such benefit.

The waiver is not required to specify the optional form of benefit. The participant may change the optional form of benefit , but not the nonspouse beneficiary , without obtaining the spouse 's consent. A a Plans not subject to section a A participant in a plan that is not subject to the survivor annuity requirements of section a 11 because of subparagraph B iii thereof may waive the spousal benefit at any time, provided that no such waiver shall be effective unless the spouse has consented to the waiver.

The spouse may consent to a waiver of the spousal benefit at any time, even prior to the participant 's attaining age No spousal consent is required for a payment to the participant or the use of the accrued benefit as security for a plan loan to the participant. Ninety days after the date of death is deemed a reasonable period. Greater than 90 days is deemed unreasonable if it is less favorable to the surviving spouse than any period that applies to other plan distributions.

A rollover contribution including a direct rollover is not a direct or indirect transfer that would cause the survivor annuity requirements to apply. Offset plans are transferee plans. To be an acceptable method of accounting, the plan must allocate all gains, losses, withdrawals, contributions, forfeitures and other charges and credits on a reasonable and consistent basis between the accrued benefits subject to the survivor annuity rules and other benefits. If the plan language is deficient, the plan will need to be amended.

Omission of the required language is a disqualification issue. If beyond the IRC b period, the plan is subject to disqualification. If a plan that is not subject to IRC is a transferee plan, determine whether it has an acceptable separate accounting for transferred assets.

If not, determine whether the plan has made all benefits subject to the survivor annuity requirements. Thus, for profit-sharing and stock bonus plans not subject to IRC , the only time spousal consent is required is if the participant wants the non-forfeitable account balance to go to someone other than the spouse. Receives a description of the material features of the optional forms of benefit available under the plan.

A significant detriment is created when a participant elects to defer receipt of a distribution and is treated less favorably than other plan participants. Determining what is a significant detriment to the participant is based on facts and circumstances.

One factor to consider is whether the employer has a valid business reason for the disparate treatment between former participants and active participants. See Rev. There are several exceptions to the participant consent requirements while the benefit is immediately distributable.

For distributions on or after October 17, , the look back rule is eliminated. Spousal consent is required for any distribution before the distribution is immediately distributable in other words, if the plan distributes before the later of age 62 or the normal retirement age, it must get spousal consent.

After that date, the plan may make distributions in the form of a QJSA without participant or spousal consent, but spousal consent is required for any other form of benefit. 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:. Is required all times for benefits paid in a form other than a QJSA, even when payments are no longer immediately distributable.

See exceptions to the spousal consent rule for distributions in CFR 1. 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 a 9 even though the employee, or spouse where applicable, fail to consent to the distribution. This is true even if these marital agreements are executed within the applicable election period.

The effect of antenuptial agreements on the right to waive pension benefits was considered in several cases including, Hurwitz v. Sher , F. Boeing Co. Plans subject to the survivor annuity requirements must meet those requirements for all participants, including those who are not married. A QJSA for a participant who is not married is a life annuity.

However, if the participant later marries, the deemed waiver is voided. Determine whether there has been an immediate distribution of any amount to a participant after the annuity starting date without getting spousal consent. Determine whether participants who elect to defer receipt of a distribution have the same options available to other participants. If not, determine whether the unavailability of some options results in a significant detriment to the participants deferring receipt of distributions.

Determine, by looking at the participant and spouse consent forms, that any distribution the plan made while the benefit is immediately distributable see IRM 4. Check also to see whether the consent document is correct and matches the plan document requirements. For single sum distributions, determine whether the participant and spouse were given the choice of a QJSA and that they waived it.

Determine whether distributions to unmarried participants were paid in the form of a life annuity, unless the participant appropriately elected another form of benefit. The written explanation rule is intended to ensure participants and their spouses are aware of their retirement benefit options, and the consequences of any elections they make about them. The plan must provide the information when the participant and spouse are immediately concerned rather than remotely of the consequences of their choice and when they can best make sound decisions about their retirement benefits.

To achieve these goals, IRC a 3 requires that the participant and spouse receive two benefit notices before benefits begin under the plan. The plan must provide the same information in IRM 4. See IRC a 3 B. The plan must provide participants a:. In general, the plan must give participants the opportunity to elect among the various plan options, for the:.

You can consider a period reasonable if the plan sponsor gives the notice by the end of a two-year period one year before and one year after :. However, you must consider IRC a 11 as "first applying" to a DC plan when: a benefit is transferred from a plan not subject to IRC a 11 to a plan which is, or when a participant elects under that DC plan to receive an annuity.

If a participant separates from service with the employer before they are age 35, the plan must provide the first notice within two years one year before they separate from service and one year after they separate. If that participant returns to employment, the plan must treat this employee, for this notice, as a brand-new employee, and determine another applicable period.

A plan must provide an explanation of a QJSA to a participant within a reasonable time before the annuity starting date. See IRC a 3. The general rule is that the plan must provide participants a written explanation of the QJSA 30 - days before the annuity starting date.

Generally, the annuity starting date is after the date that the plan gives the QJSA explanation to the participant. If a DB plan states and a participant elects, the plan may give the QJSA explanation on or after the annuity starting date if the required election period ends 30 days after the notice date. Also, the participant must receive a make-up payment for any missed payments plus interest.

The regulations now generally allow distributions to commence, with spousal consent if required, less than 30 days after the participant receives notice of distribution rights if the participant affirmatively elects to have the distribution commence. Plans may permit a participant to elect with spousal consent a distribution even if they receive the explanation before 30 days of the annuity starting date if the:.

Participant is told they have the right to consider whether waiving the QJSA and consent to a form of distribution other than a QJSA for at least 30 days. Participant is permitted to revoke a distribution election before the annuity starting date or, if later, within seven days after they receive the explanation. Distribution begins more than seven days after the plan gave the explanation.

The plan may permit Employee E to receive payments with an annuity starting date of December 1, if it pays the first payment on or after December 6 to meet the requirement that it distributes more than seven days after giving notice IRM 4. Note that the plan can make the remaining monthly payments on the first day of each month thereafter per the regular payment schedule.

Effective for plan years beginning after December 31, , PPA , Sections a 1 B and a 3 changed the earliest date to provide the QJSA notice from 90 days to days before the annuity starting date except for a retroactive annuity starting date.

See IRC a 6 A.