IRS Clarifies Start Date of Annuity Disclosure Rules

January 28, 2005 ( - The Internal Revenue Service has again modified the effective date of 2003 final rules regarding plan sponsors' responsibility to disclose the values of optional forms of pension benefits.

The proposed rules would modify the effective date under the final rules for annuities with starting dates beginning on or after February 1, 2006. “In the interim, plans that do not comply with [Treasury Regulation] §1.417(a)(3)-1 would be required to comply with the 1988 regulations regarding disclosure of relative value and financial effect,” the proposed regulations said. Tax code Section 417(a)(3) mandates that a plan to give a participant a written explanation of an annuity, the right to and effect of an election waiving such annuity, the right to revoke such election, and the spouse’s rights.

Even though the original effective date under the 2003 final rules was October 1, 2004, officials said they had gotten requests to put off that date to allow sponsors enough time to complete the reviews and analyses of optional forms of benefit to prepare proper comparisons of their relative value to the qualified joint and survivor annuity (QJSA), the proposed regulation noted.

The rules that were finalized on December 16, 2003,consolidated content requirements for QJSA and qualified pre-retirement survivor annuity (QPSA) explanations They required plan sponsors of qualified defined benefit plans to notify eligible participants of the relative value and financial effect of available optional forms of benefits to help participants compare distribution options.

The IRS and the Treasury Department on June 30, 2004  postponed the October 1, 2004 date to February 1, 2006, in certain cases.

Defined benefit plans and some defined contribution plans are required to distribute vested benefits as a QJSA that provides at least half the value of the benefits to a spouse at the death of the retired plan participant. The QJSA must be worth at least as much as the actuarial equivalent of a single annuity or any optional form of benefit under the plan. A QPSA entitles a surviving spouse at least the amount entitled under a QJSA if the participant dies before retiring.

The newly proposed regulations also would modify the 2003 final regulations in other ways:.

  • The proposed regulations would permit the use of reasonable estimates, like those used to disclose participant-specific information, for purposes of disclosing the normal form of benefit as part of generally applicable information.
  • The proposed rules clarified that a QJSA explanation “Does not fail to satisfy the requirements for QJSA explanations made in the form of disclosures of generally applicable information merely because the QJSA explanation contains an item of participant-specific information in place of the corresponding generally applicable information.”

Written and electronic comments and requests for a public hearing must be received by April 28, 2005. Submissions can be sent to: CC:PA:LPD:PR (REG-152914-04), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions can also be sent electronically, via the IRS Internet site at: or via the Federal eRulemaking Portal at (indicate IRS and REG-152914-04).