If a Qualified Joint and Survivor Annuity (QJSA) is required by your Plan, a married participant cannot elect a different form of benefit distribution without the consent of their spouse. 

Qualified Joint and Survivor Annuity (QJSA)

A Qualified Joint and Survivor Annuity (QJSA) is an annuity that provides a life annuity to the participant and a survivor annuity to the participant’s spouse after the participant’s death. The survivor annuity must be between 50% and 100% of what was paid to the participant during their lifetime.

A QJSA is the required benefit distribution method for the following plans:

• Defined benefit plans
• Money purchase plans
• Target benefit plans

Additionally, a QJSA is required under a profit-sharing or stock bonus plan unless the plan meets all of the following conditions:

1. The death benefit is paid in full to the surviving spouse unless the spouse has consented to another beneficiary.
2. A life annuity cannot be elected in the plan, or the participant does not choose the life annuity option.
3. The benefit is not the result of a direct transfer from another plan that was required to provide a QJSA.

If the QJSA requirement applies, the QJSA is mandatory unless the participant elects another benefit distribution form allowed by the plan. However, this election is not valid unless it is approved by the participant’s spouse, if applicable. An exception exists for distributions of small amounts.

The Problem

A common plan error occurs when a plan distributes a benefit in a manner other than the QJSA without obtaining spousal consent. This mistake may arise from an error where a participant is incorrectly categorized as unmarried in the plan records.

Failure to obtain spousal consent is considered an operational error and can lead to plan disqualification. To resolve the issue, the plan sponsor should use the Employee Plans Compliance Resolution System (EPCRS).

Correction

Through the Voluntary Correction Program (VCP) under EPCRS, the plan sponsor is typically required to notify the participant and spouse of the error. The spouse must provide the necessary consent. If the spouse cannot be located or does not give consent, the spouse is entitled to the benefit that would have been paid under the survivor annuity of the QJSA, had the participant passed away. If the participant has already received a distribution in another form without spousal consent and the spouse cannot be located or declines to waive, corrective contributions or benefit adjustments may be necessary. The plan sponsor should document all efforts and coordinate with the IRS during the VCP process.

For Assistance with Spousal Consent Errors

If you need help, contact Ekon Benefits at (314) 367-6555 or info@ekonbenefits.com.

Straight From the Source

IRS – Fixing Common Plan Mistakes: Spousal Consent Errors https://www.irs.gov/retirement-plans/plan-sponsor/fixing-common-plan-mistakes-failure-to-obtain-spousal-consent

IRS – EPCRS Rev. Proc. 2021-30 https://www.irs.gov/pub/irs-drop/rp-21-30.pdf