Life and Death Planning for Retirement Benefits

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Chapter 3: Marital Matters 175
There are exceptions to the REA requirements, even for covered plans. These exceptions,
are usually not significant in estate planning, but may be significant in a particular client’s
situation.
For example, no spousal consent is required for distribution of benefits to the participant
when the total value of his benefits is under $5,000. Reg. There are modified
rules for ESOPs and exceptions for certain benefits accrued before REA’s
effective date (1984). No spousal consent is required if “it is established to the satisfaction of a
plan representative that the consent...may not be obtained because there is no spouse, because the
spouse cannot be located ....
Even the “significant” exceptions can be insignificant if the plan negates the exception by
giving the spouse more rights than REA requires, usually for reasons of administrative
convenience. For example, REA does not require that a QPSA, or 100 percent-death-benefit-in-
lieu-of-QPSA, be paid to a spouse who was married to the participant for less than a year prior to
the date of death. However, many retirement plan designers decided it
was easier to grant the same rights to all spouses, regardless of the length of the marriage.
Similarly, the value of the legally-required QPSA (which is supposed to be equivalent only
to the survivor pension the spouse would have received under a QJSA) is less than the total value
of the employee’s accrued benefit in the plan. However, some plans simply award every
nonconsenting spouse 100 percent of the value of the participant’s benefit, presumably because
that is administratively easier than figuring out for each individual employee and spouse what
would have been the relative values of their shares under a QJSA.
The spouse loses her REA rights upon divorce or legal separation or her “abandonment”
of the participant. Reg. A-27. (Instead, she may receive a share of the benefits
through a “qualified domestic relations order” issued in connection with the divorce; se )
3.4.06 Requirements for spousal consent or waiver
and regulations contain elaborate rules that must be complied with in order to have
a valid spousal consent to the participant’s waiver of the QPSA or the QJSA. The IRS has
published sample spousal consent forms. Notice 97-10, 1997-1 C.B. 370.
REA creates serious, and sad, difficulties when a mentally disabled spouse is unable to
consent to the desired estate plan. In that case consent can be provided only by the spouse’s legal
guardian. Reg. A-27.
 The participant’s waiver of a QPSA, and the spouse’s consent to such waiver, must be
given after the beginning of the plan year in which the participant reaches age 35, and prior
to the employee’s death The IRS, unlike the Code itself, permits waiver of
the QPSA even before the participant reaches age 35, provided the participant goes through
the waiver/consent process again after reaching age 35. Reg. A-33.
 For exempt profit-sharing plans , the spousal consent for waiver of the 100
percent-death-benefit may be provided “at any time,” including before the participant
reaches age 35. Reg. A-33(a).