Definition of QPSA and Examples
Qualified Pre-Retirement Survivor Annuity (QPSA) is a type of death benefit paid to the surviving spouse if you were eligible for retirement and died before retirement. QPSA is often disbursed in the form of monthly payments, compensating the surviving spouse for the loss of retirement benefits that the deceased would have received.
How Qualified Pre-Retirement Survivor Annuity Works
The Employee Retirement Income Security Act of 1974 (ERISA) mandates the distribution of Qualified Pre-Retirement Survivor Annuity to the surviving spouses of employees who are eligible but die before receiving retirement benefits. These benefits are distributed as a lifetime annuity and guarantee monthly payments to the surviving spouse. The amount of each monthly payment is determined based on your account balance and your spouse’s age at the time of your death. If you choose a beneficiary other than your spouse for pre-retirement survivor benefits, your spouse must provide written consent.
Requirements for Qualified Pre-Retirement Survivor Annuity
The requirement for Qualified Pre-Retirement Survivor Annuity applies to all death benefit plans and any defined contribution plan subject to section 412 of the Internal Revenue Code, including money purchase plans. This benefit may be paid to the surviving spouse, former spouse, dependent, or child considered a surviving spouse under a qualified domestic relations order.
QPSA benefits will be paid to the beneficiaries you choose under the following conditions:
- You were an employee who participated in a retirement plan and were entitled to plan benefits.
- You died before retirement.
- You were married to the surviving spouse for at least one year before your death. Your former spouse may also receive benefits under a qualified domestic relations order.
Your surviving spouse will receive your retirement benefits only if you participate in a qualified benefit plan such as:
- Defined Benefit Plan: Also known as a “Traditional Retirement Plan,” a defined benefit plan promises the participant a specified monthly benefit at retirement.
- Money Purchase Plan: A money purchase plan is a type of defined contribution plan that requires you or your employer (or both) to contribute to your individual account under the plan, which may be at a set percentage. Your benefit depends on the total contributions made to the account and any losses or gains accrued in the account at retirement.
Some defined contribution plans, like 401(k) plans, may not provide QPSA benefits because they do not guarantee any specified amount of benefits at retirement. Your spouse may also not be eligible to receive QPSA benefits if the qualified plan you joined requires a full payment for death benefits, and you did not choose the lifetime annuity option, and it was transferred from a plan that was not subject to QPSA.
Key Takeaways
- Qualified Pre-Retirement Survivor Annuity provides monthly payments to the surviving spouse of the deceased employee.
- The amount the surviving spouse can receive is adjusted to account for any gains or losses occurring after the participant’s death.
- Retirement plans offering QPSA must notify the participant about this provision when they are between the ages of 32 and 35, or within one year of becoming a participant in the plan if employed after age 35.
Source: https://www.thebalancemoney.com/what-is-a-qualified-pre-retirement-survivor-annuity-qpsa-5207740
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