DISTRIBUTION PROVISIONS 42. Joint and survivor annuity, qualified optional survivor…

Statement of Requirement: Code §§ 401(a)(11), 417; Reg. §§ 1.401(a)-20, 1.417(a)(3)-1, 1.417(e)-1, & 301.7701-18; Notice

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2007-7, 2007-5 I.R.B. 395; Notice 2008-30, 2008- 12 I.R.B. 638; Notice 2014-19, 2014-47 I.R.B. 979; Rev. Rul. 2012-3, 2012-8 I.R.B. 383

(Note to reviewer: The survivor annuity requirements of IRC §§ 401(a)(11) and 417 apply to all plans subject to the funding standards of § 412 (i.e., money purchase pension plans, including target benefit plans). For these plans, the provisions in LRM #42 are required.

The survivor annuity requirements do not apply to defined contribution plans (other than money purchase and target benefit plans) that meet all of the following requirements: a) the plan provides that the participant’s nonforfeitable accrued benefit is payable in full, on the participant’s death, to the surviving spouse (unless the participant elects with spousal consent that the benefit be paid instead to a designated beneficiary); b) the participant does not elect to receive benefits in the form of a life annuity; and c) the plan is not a transferee or offset plan with respect to the participant.

Requirements b) and c) are applied on a participant-by-participant basis. Therefore, a profit-sharing or stock bonus plan, for example, could be subject to the survivor annuity requirements of §§ 401(a)(11) and 417 with respect to some participants but not others. In such a case, the plan provisions in LRM #42 are required.

Additionally, if the plan offers a life annuity benefit option and the participant selects this option, the survivor annuity requirements will thereafter apply with respect to that participant’s benefits under the plan. Thus, in this situation, the survivor annuity requirements may apply under the plan on a participant-by- participant basis. Also, if there is a separate accounting of the account balance subject to the participant’s life annuity election, the plan may provide that the survivor annuity requirements apply only to that part of the account balance.

If a plan otherwise exempt from these survivor annuity requirements offers a deferred annuity contract as an investment option, the plan is subject to the survivor annuity requirements discussed above and set forth below with respect to that deferred annuity (if the annuity does not allow the participant to elect another form of benefit prior to the annuity starting date). A plan that offers a deferred annuity contract as an investment option that allows a participant to elect another form of benefit is not subject to the survivor annuity requirements until the participant elects to receive a life annuity option. A participant is deemed to have elected to receive a life annuity on the annuity starting date if the participant has not elected another form of benefit prior to the annuity starting date. In such cases, the following plan provisions are required. The remainder of the participant’s account is not subject to the survivor annuity requirements if the account is

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otherwise not subject to the survivor annuity requirements and the plan separately accounts for the deferred annuity contract. See Rev. Rul. 2012-3.)

Sample Plan Language:

Article __________. JOINT AND SURVIVOR ANNUITY REQUIREMENTS.