QJSA Project Shows Most in Compliance

The Internal Revenue Service (IRS) has announced results of a compliance project that checked whether retirement plan sponsors followed qualified joint & survivor annuity (QJSA) rules.

The IRS’ Employee Plans Compliance Unit (EPCU) looked at money purchase plan sponsors whose Form 5500-SF showed distributions during the plan year.

EPCU designed the project to determine whether money purchase plan sponsors distributed benefits to married participants as a QJSA, or obtained spousal consent before distributing benefits to married participants in a form other than a QJSA, such as a single lump sum.

The agency said most plan sponsors complied with the QJSA notice and consent requirements for plan distributions; however, the EPCU did find some sponsors that didn’t secure spousal consent when the participant waived the QJSA, or didn’t ensure that a plan representative or notary public witnessed the consent.

EPCU also noted that some plan sponsors weren’t aware that the QJSA notice and consent requirements apply to any waiver of the QJSA, apply to direct rollovers and loans, and don’t apply to required minimum distributions.

The agency warns that if plan sponsors make distributions from a money purchase pension plan to married participants without obtaining spousal consent, the plan will have operational mistakes that may lead to plan disqualification. Sponsors can fix this failure through the Employee Plans Compliance Resolution System (EPCRS).

It advises plan sponsors to consult with a benefits professional to ensure they have administrative procedures in place to prevent these operational errors, and if they find errors, take prompt action to correct them.

 

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