§9.5 SPOUSAL PROTECTION UNDER ERISA
I.R.C. §401(a)(11), I.R.C. §417, and 29 U.S.C. ch. 18 (ERISA) provide safeguards for the nonworking spouse's interest in the working spouse's qualified retirement plan benefits. Generally, distributions from a qualified plan that begin during a participant's life must be in the form of a single-life annuity with respect to a single participant, or a qualified joint and survivor annuity with respect to a married participant. I.R.C. §401(a)(11)(A)(i). A qualified joint and survivor annuity is an annuity payable over the joint lives of the working and nonworking spouse, with payments to the nonworking spouse being equal to one-half of those made to the working spouse. I.R.C. §417(b)(1). For example, if the working spouse's lifetime payments were $300
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per month, the nonworking spouse's monthly payments must be $150 after the death of the working spouse.
If a married participant dies before distributions from a retirement plan have begun, the participant's spouse is entitled to a preretirement survivor annuity. I.R.C. §401(a)(11)(A)(ii). In the defined benefit plan context, a preretirement survivor annuity equals what the surviving spouse's benefits would have been under the survivor portion of a qualified joint and survivor annuity. I.R.C. §417(c)(1). Under a defined contribution plan, the surviving spouse is entitled to an annuity payable over the nonworking spouse's lifetime from one-half of the deceased participant's account balance. I.R.C. §417(c)(1).
Profit-sharing plans (i.e., §401(k) plans) receive a limited exemption from the annuity requirements. This exemption is available only if the plan provides that upon his or her death, the participant's benefit is payable in full to the participant's surviving spouse, and the participant does not elect payment of benefits in the form of a life annuity. I.R.C. §401(a)(11)(B)(iii). The annuity requirements, however, attach to any profit-sharing account that represents benefits formerly held by a plan that were subject to the annuity requirements. Id. Importantly, the annuity requirements do not apply to IRAs.
In short, there are valuable federal property rights for the spouse of a participant. In the case of a typical money purchase pension plan or other plan fully subject to the annuity rules, the spousal protection applies to any distributions made during the participant's lifetime and at the participant's death. In the case of a plan not subject to the annuity requirements (i.e., a profit-sharing or §401(k) plan), the surviving spouse must be the sole beneficiary of the participant's account unless the spouse consents otherwise. Essentially, under the annuity requirements, the spouse is given a one-half interest in the plan. Under the profit-sharing plan exception, the spouse has no rights during the participant's lifetime (other than those provided under community property laws) but is entitled to be the sole beneficiary at the participant's death. A pian subject to the spousal annuity rules may require the participant and spouse to be married one year before the spousal annuity rules apply to the participant's account. These rights may only be waived in accordance with the terms of the applicable plan document.
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