9103 / How are employer-sponsored retirement benefits impacted when an employee is married?

Certain types of plans are required to provide automatic survivor benefits in the form of qualified joint and survivor annuities (QJSA) or qualified preretirement survivor annuities (QPSA) as the typical form of retirement benefit for married participants unless both the employee and the spouse consent to waive this requirement. The requirement that a plan provide the QJSA and QPSA forms of benefit generally applies to all defined benefit plans, to all defined contribution plans that are subject to minimum funding standards (e.g., target benefit and money purchase pensions), and to profit sharing plans that include annuity provisions as the normal form of benefit (see Q 3881, Q 3882).¹

A QJSA is an annuity (1) for the life of the participant, with a survivor annuity for the life of his or her spouse that is not less than one-half (nor greater than 100 percent) of the amount of the annuity payable during the joint lives of the participant and his or her spouse, and (2) that is the actuarial equivalent of a single annuity for the life of the participant.² The QJSA must be at least as valuable as any other optional form of benefit payable under the plan at the same time (see Q 3883).

A QPSA is a survivor annuity for the life of the surviving spouse of the participant under which payments are to begin no later than the month in which the participant would have reached the earliest retirement age provided under the plan and that also meets the following requirements with respect to the amount of the annuity:

(1)   In the case of a defined contribution plan, the survivor annuity is the actuarial equivalent of the participant’s account and must not be less than one-half of the participant’s vested account balance as of the date of his or her death unless waived by the participant and spouse.³

(2)   In the case of all other plans, (x) if the participant died after the date the participant attained the earliest retirement age provided under the plan, the payments to the surviving spouse must not be less than the amounts that would have been payable under the survivor portion of a qualified joint and survivor annuity had the participant retired with an immediate qualified joint and survivor annuity on the day before he died, or (y) if the participant died on or before the date the participant would have reached the earliest retirement age, the payments to the surviving spouse must not be less than the amounts that would have been paid under the survivor portion of a QJSA had the participant separated from service on the earlier of the actual time of separation or death, survived to the earliest retirement age, retired with an immediate qualified joint and survivor annuity at the earliest retirement age, and died on the day after he or she reached the earliest retirement age.⁴ In any case, payments to the surviving spouse must not violate the incidental benefit rule ( Q 3830).⁵

If the retirement plan is covered by ERISA, the participant’s spouse may automatically be the beneficiary, which means that if a spouse wishes for the benefits to be transferred to a non-spousal beneficiary (such as a child) upon his or her death, the beneficiary must now affirmatively make the election.

If a plan participant is married and wishes to take out a loan from a retirement plan, the participant’s spouse must generally consent. Further, plans must comply with qualified domestic relations orders (QDROs, see Q 9097), which are often used to divide retirement plan assets in a divorce proceeding.