The requirement that a plan provide the qualified joint and survivor annuity (“QJSA”) and qualified preretirement survivor annuity (“QPSA”) forms of benefit (Q 3882) applies to all defined benefit plans, to all defined contribution plans that are subject to minimum funding standards (e.g., target benefit and money purchase pensions), and to profit sharing plans that include annuity provisions as the normal form of benefit.¹The automatic survivor benefit requirements also may apply to any participant under any other defined contribution plans unless, (1) the plan provides that in the event of the participant’s death, his or her non-forfeitable accrued benefit will be paid in full to his or her surviving spouse or to another designated beneficiary if the spouse consents or if there is no surviving spouse; (2) the participant does not elect payment of benefits in the form of a life annuity; and (3) with respect to such participant, the plan is not a direct or an indirect transferee of a plan to which the automatic survivor annuity requirements apply.²

The automatic survivor benefit requirements will not apply to the portion of benefits accrued under a tax credit ESOP or leveraged ESOP if the participant has the right to demand distribution in the form of employer securities or to require repurchase by the employer of non-publicly traded securities.³

Plans that are subject to the automatic survivor benefit requirements (Q 3881), sometimes referred to as the QJSA requirements, must provide that, unless waived by the participant with the consent of the spouse (Q 3890), retirement benefits will be paid in the form of a “qualified joint and survivor annuity.”¹An unmarried participant must be provided with a life annuity, unless he or she elects another form of benefit.²

Furthermore, such plans must provide that if a vested participant dies prior to the annuity starting date, benefits will be paid to a surviving spouse in the form of a “qualified preretirement survivor annuity.”

This benefit requirement may be waived by the participant with the consent of his or her spouse (Q 3890).

These requirements apply to all pension plans but only to certain profit sharing plans. This requirement only applies to profit sharing plans where the document specifies the normal form of benefit is payable as an annuity or where the profit sharing plan contains pension plan assets of a plan of the employer that were merged into the profit sharing plan. Most profit sharing plans do not specify that benefits be paid in the form of an annuity.³

When a plan is subject to these requirements, notices are required advising the participant and spouse of their benefits. Thus, benefits other than the required QJSA or QPSA cannot be paid from a pension plan unless the participant (and spouse, if married) elects not to receive the annuity payment.

An exception to these general rules applies if the present value of the participant’s benefit does not exceed $5,000 and the plan specifies that a lump sum payout will be paid without need for consent of either the participant or spouse. If the payment is after the participant’s annuity starting date, the participant and the participants’ spouse (or surviving spouse) must consent in writing.⁴

The annuity starting date is the first day of the first period for which an amount is payable as an annuity regardless of when or whether payment is actually made or, in the case of benefits not payable in the form of an annuity, the date on which all events have occurred that entitle the participant to the benefit.⁵ This requirement applies only to those benefits in which a participant was vested immediately prior to his or her death under a defined benefit plan and to all non-forfeitable benefits that are payable under a defined contribution plan.⁶

A qualified joint and survivor annuity (“QJSA”) is an annuity (1) for the life of the participant, with a survivor annuity for the life of his or her spouse that is not less than one-half (nor greater than 100 percent) of the amount of the annuity payable during the joint lives of the participant and his or her spouse, and (2) that is the actuarial equivalent of a single annuity for the life of the participant.¹With respect to married participants, the qualified joint and survivor annuity must be at least as valuable as any other optional form of benefit payable under the plan at the same time. If a plan has two joint and survivor annuities that satisfy the QJSA requirements and one has a greater actuarial value than the other, the more valuable one is the QJSA. If a plan offers two actuarially equivalent joint and survivor annuities that meet the QJSA requirements, it may designate which joint and survivor annuity is the QJSA and allow a participant to elect out of the designated QJSA in favor of the equal QJSA without spousal consent.²

A plan subject to the QJSA requirements must permit a participant to receive a distribution under a QJSA when the participant attains the earliest retirement age under the plan. Written consent of the participant (but not the spouse) is required for a QJSA benefit to commence. The earliest retirement age is the earlier of the earliest age at which a participant could receive a distribution under the plan or the early retirement age determined under the plan (or, if no early retirement age, the normal retirement age under the plan).³

A qualified preretirement survivor annuity (“QPSA”) is a survivor annuity for the life of the surviving spouse of the participant under which payments are to begin no later than the month in which the participant would have reached the earliest retirement age provided under the plan and that also meets the following requirements with respect to the amount of the annuity:

(1)    In the case of a defined contribution plan, the survivor annuity is the actuarial equivalent of the participant’s account and must not be less than one-half of the participant’s vested account balance as of the date of his or her death unless waived by the participant and spouse.¹

(2)    In the case of all other plans, (x) if the participant died after the date the participant attained the earliest retirement age provided under the plan, the payments to the surviving spouse must not be less than the amounts that would have been payable under the survivor portion of a qualified joint and survivor annuity had the participant retired with an immediate qualified joint and survivor annuity on the day before he died, or (y) if the participant died on or before the date the participant would have reached the earliest retirement age, the payments to the surviving spouse must not be less than the amounts that would have been paid under the survivor portion of a QJSA had the participant separated from service on the earlier of the actual time of separation or death, survived to the earliest retirement age, retired with an immediate qualified joint and survivor annuity at the earliest retirement age, and died on the day after he or she reached the earliest retirement age.² In any case, payments to the surviving spouse must not violate the incidental benefit rule (Q 3830).³

A defined benefit plan must permit the surviving spouse to receive distributions under the QPSA no later than the month in which the participant would have attained the earliest retirement age. In the case of a defined contribution plan, the spouse must be permitted to elect to begin receiving payments under the QPSA within a reasonable time after the participant’s death.⁴

In plan years beginning after December 31, 2007, a plan will satisfy the QJSA requirements only if a participant who has waived the QJSA may elect a qualified optional survivor annuity.¹ Spousal consent is not required to elect a qualified optional survivor annuity.

Generally, spousal consent is subject to a physical presence requirement so that the spouse granting consent must do so in person, before a notary public. When a plan participant requests a distribution or loan (the availability of which were expanded by the 2020 CARES Act), the spouse must grant a waiver. Notice 2020-42 provides relief in permitting remote electronic notarization executed via live auto-video technology that satisfies any state-level requirements that apply to a notary public.

The relief in Notice 2020-42 applies to any participant election that requires a signature to be witnessed in the physical presence of a plan representative or notary on or after January 1, 2020 and before December 31, 2020. Notice 2021-03, Notice 2021-40 and Notice 2022-27 extended the physical presence relief through December 31, 2022.  The IRS has released proposed regulations that would make this relief permanent.  Under the proposed rule, the spouse’s signature must be witnessed using live audio-video technology regardless of whether remote notarization is witnessed by a notary or plan representative.  Further, the electronic system must provide for effective access and be reasonably designed to prevent anyone other than the spouse from making the election.  The spouse must be provided a reasonable opportunity to review, confirm, modify or rescind the election before it becomes effective in all cases, even where a spouse would not be able to rescind the election if the signature were witnessed in person.  The spouse must also receive written or compliant electronic confirmation of the effect of the election within a reasonable time afterward.

The term qualified optional survivor annuity means an annuity for the life of the participant with a survivor annuity for the life of the spouse that is equal to an “applicable percentage” of the amount of the annuity that is payable during the joint lives of the participant and spouse and is the actuarial equivalent of a single annuity for the participant’s life. For this purpose, if the survivor annuity percentage is less than 75 percent, the qualified optional survivor annuity percentage must be at least 75 percent. If the survivor annuity percentage is equal to or greater than 75 percent, the qualified optional survivor annuity percentage must be at least 50 percent.²

A plan generally is not required to provide either the QJSA or the QPSA (but may do so) if the participant and the spouse were not married throughout the one year period ending on the earlier of the participant’s annuity starting date (see Q 3882) or the date of the participant’s death. If a participant marries within one year before the annuity starting date and the participant and the participant’s spouse were married for at least a one year period ending on or before the date of the participant’s death, the participant and the spouse are treated as though they had been married throughout the one year period ending on the participant’s annuity starting date.¹ Special rules may apply where there is a Qualified Domestic Relations Order (“QDRO”) in effect that applies to plan benefits (Q 3915).

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Planning Point: Because of the administrative difficulties involved, plan sponsors should consider whether the costs of imposing a one year of marriage requirement outweigh any potential savings. Where possible, plan sponsors should design plans to minimize the administrative processes for profit sharing plans.

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Planning Point: In United States v. Windsor,² the Supreme Court found the Defense of Marriage Act (DOMA) unconstitutional.  DOMA defined marriage as a legal union between one man and one woman and spouse as a person of the opposite sex. Revenue Ruling 2013-17³ provides that for federal tax purposes, spouse means a person of the same sex if lawfully married under state law and marriage includes marriage between persons of the same sex. Notice 2014-19⁴ provides further guidance on the application of Windsor and Revenue Ruling 2013-17 to qualified plans. The Supreme Court’s decision in Obergefell v. Hodges⁵ requires states to recognize same sex marriages performed in other states. This ruling will simplify plan administration, as administrators will no longer have to apply the place of celebration rule to determine whether the marriage was lawful. Notice 2015-86 provides guidance on the application of Obergefell to plans.⁶

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As noted in Q 3881, unless a profit sharing plan document is written to provide an annuity as the normal form of benefit, or if the plan contains pension assets that were merged into the profit sharing plan, QJSA and QPSA annuity rules do not apply. Another requirement, however, mandates that at least 50 percent of the benefit be paid to a surviving spouse. Under waiver rules similar to those discussed in Q 3890, a spouse may agree to waive these rights and have the benefit paid to another beneficiary.In 2012, the IRS issued Revenue Ruling 2012-3, which describes how the QJSA and QPSA rules apply when a deferred annuity contract is purchased under a profit-sharing plan.¹ Qualified joint and survivor annuity (QJSA) and qualified preretirement survivor annuity (QPSA) rules generally impose a series of spousal consent, notice, and election requirements upon certain lifetime income options. While the rules regarding whether a defined contribution plan is subject to QJSA and QPSA requirements are relatively clear, it has been much more difficult to determine when these requirements would apply to a plan that contains a deferred annuity contract.

Revenue Ruling 2012-3 outlines the QJSA and QPSA requirements in situations involving defined contribution plans that contain deferred annuity contracts.

If a defined contribution plan contains a deferred annuity contract, QJSA requirements are not triggered until the plan participant irrevocably elects to receive the retirement funds in the form of an annuity. As a result, even in a situation where a life annuity may be the default payment under a deferred annuity, if the participant has the option to choose another investment option or receive a lump-sum payment, the plan will not be subject to the QJSA and QPSA requirements until the annuity actually starts making payments (or until the participant can no longer change his or her investment options). Further, if the participant does not affirmatively elect a life annuity during the 180 days before the annuity starting date, he or she is not considered to have elected the life annuity until the starting date.

QPSA requirements will not be triggered if the annuity contract gives the plan participant’s surviving spouse a nonwaivable right to the QPSA benefit. If it is not certain that the surviving spouse will receive the benefit, then the QPSA requirements apply.

A plan subject to the QJSA rules generally must provide, within certain specified periods, each participant (vested and nonvested, married or unmarried) with a written explanation of the automatic survivor annuity forms of benefit, certain optional forms of benefit, and their relative values. The notice must explain the participant’s (and his or her spouse’s) rights with respect to waiving such benefits.¹ Notices of automatic survivor benefits generally may be provided in electronic form provided certain requirements are met.²The explanation may be provided after the annuity starting date, but the applicable election period for waiving the benefit (Q 3890) may not end before the thirtieth day after the explanation is provided.³ Under certain circumstances, a “retroactive annuity starting date” may be permitted (Q 3890).⁴ The plan may allow the participant with any applicable spousal consent to waive the 30 day requirement if the distribution begins more than seven days after the explanation is provided.⁵

The explanation must include information on the financial effect and relative value comparisons of any optional forms of benefit compared to the value of the QJSA. This may be offered in the form of generally applicable information or as information that is specific to the participant to whom it is provided. Details and procedures for making the required disclosures, as well as a sample disclosure, are set forth in final regulations. These requirements generally are effective for QJSAs with annuity starting dates after February 1, 2006.⁶

A defined benefit pension plan that fully subsidizes a qualified survivor annuity is not required to provide an explanation unless it offers participants an election to waive the benefit or designate a beneficiary.⁷

For plan years beginning before January 1, 2008, the present value of the accrued benefit generally was required to be determined using the annual interest rate on 30-year Treasury securities for the month before the date of distribution. Temporary regulations permitted the employer to base the determination on a monthly, quarterly, or annual interest rate. The rate could have been determined using any month during a “stability period” of up to five months, provided the plan specified the month that will be used. In any event, the interest rate had to be determined in a consistent manner that is applied uniformly to all plan participants.¹In plan years beginning after December 31, 2007, the present value of the accrued benefit generally must be determined using a mortality table specified in regulations and an interest rate derived from a three-segment yield curve, phased in over five years.²

Corrective distributions of excess deferrals, excess contributions, and excess aggregate contributions (Q 3760, Q 3808) from a 401(k) plan are not subject to the QJSA or spousal consent rules.³

Plans that offer plan loans (Q 3953 to Q 3960) and are subject to the QJSA requirements generally must provide that no portion of the accrued benefit of the participant may be used as security for any loan unless, at the time the security agreement is entered into, the participant’s spouse consents to the use of the accrued benefit as security.⁴ If spousal consent is not obtained or is not required at the time benefits are used as security, it is not required at the time of any setoff of the loan against the accrued benefit, even if the participant is married to a different spouse at the time of the setoff.⁵

The IRS audits plans to determine if the consent rules have been met. Revenue Procedure 2016-51⁶ explains the procedure to follow if distributions are made without spousal consent.

The automatic survivor benefit rules generally do not apply to a beneficiary who murders his or her participant spouse.⁷ An employee’s widow convicted of his murder was held entitled to receive the preretirement annuity where applicable state law made her a constructive trustee of the annuity.⁸

A qualified plan that is subject to the automatic survivor benefit rules generally must provide that participants may elect (or revoke an election) to waive the qualified joint and survivor annuity (“QJSA”) or the qualified preretirement survivor annuity (“QPSA”) forms of benefit (Q 3882) at any time during the applicable election period.¹ The participant may elect the qualified optional survivor annuity (“QOSA”) at any time during the applicable election period.²The plan also must provide that such an election will not be effective unless (1) the spouse of the participant, if any, consents in writing to the election, (2) the election designates a beneficiary or a form of benefits that may not be changed without spousal consent (unless the consent expressly permits future designations by the participant without further spousal consent), and (3) the consent acknowledges the effect of the election and is witnessed by a plan representative or notary public.³ See Q 3886, which explains the use of the term spouse to apply to same sex couples.

An election made without the consent of the spouse is effective only if it is established to the satisfaction of a plan representative that there is no spouse, that the spouse cannot be located, or that certain other specified circumstances prevent securing such consent.⁴ Caution should be exercised when following any of these exceptions as a missing spouse who suddenly resurfaces may be entitled to benefits that already have been fully paid to another beneficiary. Any consent by the spouse of a participant, or proof that consent cannot be obtained from the spouse, is effective only with respect to that spouse and not to any subsequent spouse except in the case of plan benefits securing a loan (Q 3882).⁵

A spousal waiver that had not been properly witnessed or notarized was struck down despite the wife’s acknowledgement that she had signed the form because the waiver did not meet the requirements clearly set forth in the IRC and ERISA.⁶

In an earlier district court ruling, the lack of a written, notarized spousal consent did not render the designation of a non-spouse beneficiary completely ineffective; the designation remained effective to the extent the benefits exceeded what was required to be paid to the spouse.⁷ In another case, the Seventh Circuit held that where the husband was also the plan representative, his wife’s consent was valid even though he did not witness it on behalf of the plan, because he knew the person who signed it was his wife.⁸

Prior consent to waive a benefit is not invalid simply because the benefit increased after the consent was given.⁹

A prenuptial agreement or similar contract entered into prior to marriage is not, by itself, effective to waive a widow’s surviving spouse benefits,¹⁰ based on parallel provisions found in ERISA Section 205(c) and IRC Section 417(a).¹¹ For a valid waiver to occur, ERISA requires a notarized waiver containing specific language by a spouse who actually is entitled, by marriage, to the statutory benefits being waived. In addition, the spouse executing the waiver must designate an alternative beneficiary.¹²

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Planning Pointer: If the parties intend that the surviving spouse’s right to benefits be waived after the marriage, the agreement should provide that the waiver be executed in conformance with the waiver requirements after the marriage.

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The Court of Appeals for the Eighth Circuit held that neither a prenuptial agreement with a participant’s second wife, nor a separation agreement in which his first wife had “relinquished any right, title or interest in and to any … pension plans,” constituted a valid waiver; thus, the court divided the benefit equally between them on his death.¹³

The Court of Appeals for the Fourth Circuit found that a valid waiver was executed where the separation agreement specified the plan in which the interest was waived, even though the ex-spouse was still named as beneficiary.¹⁴

A plan is not required to permit a waiver of the QJSA or QPSA form of benefit if it fully subsidizes the cost of such benefit and does not permit a participant to waive the benefit or designate another beneficiary. A plan fully subsidizes the cost of a benefit if the failure to waive the benefit would not result in a decrease of any plan benefits to the waiving participant and would not result in increased contributions from that participant.¹⁵

Applicable Election Period

With respect to the QJSA form of benefit, the applicable election period is the 180-day period ending on the annuity starting date (the 90-day period, in the case of plan years beginning before 2007).¹⁶ The plan generally may not commence the distribution of any portion of a participant’s accrued benefit to which these requirements apply unless the applicable consent requirements are satisfied.¹⁷

A plan must provide participants with written notice of the QJSA requirement no less than 30 days and no more than 180 days (90 days for plan years prior to 2007) before the annuity starting date.¹⁸ If a participant, after receiving the written explanation of the QJSA, affirmatively elects a form of distribution with spousal consent, the plan will not fail to satisfy the requirements of IRC Section 417(a) merely because the annuity starting date is less than 30 days after the written explanation was provided to the participant, provided four requirements are met:

(1)    the plan administrator must provide information to the participant clearly indicating that the participant has a right to at least 30 days to consider whether to waive the QJSA and consent to another form of distribution;

(2)    the participant must be permitted to revoke an affirmative distribution election at least until the annuity starting date, or, if later, at any time prior to the expiration of the seven day period that begins the day the explanation of the QJSA is provided to the participant;

(3)    the annuity starting date must be after the date the explanation of the QJSA is provided, except as provided in IRC Section 417(a)(7) (Q 3882); and

(4)    distribution in accordance with the affirmative election must not begin before the expiration of the seven-day period that begins the day the explanation of the QJSA is provided to the participant.¹⁹

With respect to the QPSA form of benefit, the applicable election period begins on the first day of the plan year in which the participant attains age 35 and ends on the date of his or her death. Where a participant has separated from service with the employer, the election period with respect to previously accrued benefits may begin no later than the date of separation.²⁰

The applicable election period may not end before the 30th day after the plan provides the explanation required under IRC Section 417(a)(3).²¹ Under that rule, a plan generally must, within certain specified periods, provide each participant (vested and non-vested, married or unmarried) with a written explanation of the automatic survivor annuity forms of benefit and of the participant’s (and his or her spouse’s) rights with respect to waiving the benefits (Q 3882).