Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

 Waiver of the QJSA benefit must occur not more than 90 days prior to the annuity starting date, so it is impossible to lock in spousal consent far in advance.  REA rights cannot be waived in a prenuptial agreement, because the employee’s affianced is not at that point the “spouse,” even if the agreement is executed within the applicable election period. Reg. § 1.401(a)-20 , A-28. A prenuptial agreement can, however, settle the parties’ rights with respect to division of retirement benefit in case of divorce, because REA does not provide any spousal rights in the benefits in case of divorce (that subject being left to the divorce court).  “No consent is valid unless the participant has received a general description of the material features, and an explanation of the relative values of, the optional forms of benefit available under the plan in a manner which would satisfy the notice requirements of section 417(a)(3).” Reg. § 1.417(e)-1(b)(2)(i) . Although this disclosure must be provided to the participant rather than to the spouse, the spouse’s consent to the participant’s waiver of the QJSA or QPSA must “acknowledge the effect” of the election. § 417(a)(2)A)(i) . This probably means that the spouse should see the same disclosures provided to the participant, in order that the spouse may understand the effect of the waiver.  An election in proper form “designates a beneficiary (or a form of benefits) which may not be changed without spousal consent (or the consent of the spouse expressly permits designations by the participant without any requirement of further consent by the spouse), and...the spouse’s consent acknowledges the effect of such election and is witnessed by a plan representative or a notary public ....” § 417(a)(2)(A) . See Reg. § 1.401(a)-20 , A-31, for more on the form of spousal consent.  If the spouse consents to the participant’s naming a trust as beneficiary, later amendments to the trust do not require a subsequent spousal consent. Reg. § 1.401(a)-20 , A-31(a). 3.4.07 Spousal waiver or consent: Transfer tax aspects Would a surviving spouse’s waiver of REA benefits, after the participant’s death, be considered a disclaimer? And, if it is a disclaimer, is it a “qualified” disclaimer if the spouse’s rights “vested” in her before the participant’s death, so that the disclaimer is “too late” if made more than nine months after such vesting? See ¶ 4.4.06 regarding the deadline for a qualified disclaimer. There is no concern about possible gift tax implications of a spousal waiver before the participant’s death, because § 2503(f) provides that, “If any individual waives, before the death of a participant , any survivor benefit, or right to such benefit, under § 401(a)(11) or 417 [“REA” benefits, in other words], such waiver shall not be treated as a transfer of property by gift for purposes of this chapter” (emphasis added). This gift tax exemption for lifetime spousal waivers or REA benefits seems to suggest that:  Spousal waivers of REA-guaranteed benefits after the participant’s death could be treated as a gift-taxable transfers. However, GCM 39858 (which was issued in 1989, though it is inexplicably dated 9/9/81) negated this suggestion, stating that § 2503(f) creates “no inference” that Congress intended to impose gift tax on spousal waivers that occur after