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401k Plan 401k rules 401k Rules

Chapter 5: Providing Survivor Benefits

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Corporate and Institutional Investors

This chapter tells you what survivor benefit protections ERISA provides to your surviving spouse if your benefit was vested upon your death.

These questions are addressed:

What happens to your benefits upon death?

What is a qualified joint and survivor annuity (QJSA)?

What is a qualified pre-retirement survivor annuity (QPSA)?

What survivor benefit rules apply to most defined contribution plans (such as 401k plans)?

Where can you get more information about QJSA and QPSA rights?
How do I contact Atlantic Financial?

What happens to your benefits upon death?

ERISA provides some protection to surviving spouses of deceased participants who had a vested retirement benefit before death. The nature of the protection depends on the type of plan and whether the participant dies before or after payment of the benefit is scheduled to begin, otherwise known as the annuity starting date. The summary plan description, described in Chapter 2, will tell you the type of plan involved and whether survivor annuities or other death benefits are provided under the plan.

What is a qualified joint and survivor annuity (QJSA)?

In a defined benefit plan or a money purchase plan, the form of retirement benefit payment, unless you and your spouse (if any) chose otherwise, must be a series of equal, periodic payments over your lifetime, with a payment continuing to your spouse for the rest of his or her life if he or she survives you. The periodic payment to your surviving spouse must be at least 50 percent, and not more than 100 percent, of the periodic payment received during your joint lives. This form of payment is called a qualified joint and survivor annuity (QJSA).

If the plan provides other forms of benefit payment, and you and your spouse want to waive your rights to receive the QJSA and select one of the other payment forms available, you can do so according to specific rules. You and your spouse must receive a timely explanation of the QJSA, your waiver must be made in writing within certain time limits, and your spouse must give consent to the waiver in writing witnessed by a notary or plan representative.

What is a qualified pre-retirement survivor annuity (QPSA)?

A survivor annuity must also be offered by a defined benefit or money purchase plan if a married participant with a vested benefit dies before he or she begins receiving benefits. This survivor annuity is called a qualified preretirement survivor annuity (QPSA). ERISA specifies how the QPSA is calculated. You and your spouse must be given a timely explanation of the QPSA. You may only waive the right to a QPSA in writing, and your spouse must consent to the waiver of the QPSA in writing, witnessed by a notary or plan representative.

What survivor benefit rules apply to most defined contribution plans (such as 401k plans)?

Most profit-sharing and stock bonus plans, like 401k plans, generally need not offer a survivor annuity. However, there are rules for such plans that protect the spouse as beneficiary.

Before you begin to receive your benefits under such a plan, your spouse is automatically presumed to be your beneficiary. Thus, if you die before you receive your benefits, all of your benefits will automatically go to your surviving spouse. If you wish to select a beneficiary other than your spouse, your spouse must consent in writing, witnessed by a notary or plan representative. This protects your spouse in the event of your death before any payout has been made. When you reach a distribution date, however, such as when you terminate employment or reach retirement, you may choose, without your spouse's consent, among any optional forms of payment offered by the plan, including a life annuity, if offered by the plan. If you choose a life annuity, however, your spouse is then protected by QJSA rules, and the benefit will be paid as a QJSA unless you and your spouse consent to a different form, as outlined above.

Where can you get more information about QJSA and QPSA rights?

ERISA and the Internal Revenue Code prescribe detailed rules regarding the QJSA and QPSA rights. You may wish to obtain from the Internal Revenue Service the following publications on survivor annuities:


Defined Contribution Plan
IRS Publication 1565 Looking Out for #2: A Married Couple's Guide to Understanding Your Benefit Choices at Retirement from a Defined Contribution Plan


Defined Benefit Plan
IRS Publication 1566 Looking Out for #2: A Married Couple's Guide to Understanding Your Benefit Choices at Retirement from a Defined Benefit Plan.

These rules reflect the law in effect for participants who completed an hour of service (or paid leave) on or after August 23, 1984. ERISA's survivor annuity rules are different if you are the surviving spouse of a participant who left employment before that date.

Source: Department of Labor


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