Definition:
The Qualified Joint and Survivor Annuity (QJSA) is a system whereby a retirement benefit is paid to the beneficiary, typically on a monthly basis, for the duration of the life of the retirement account holder. After the death of the retirement account holder, the monthly amount is transferred to the surviving beneficiary, whether it is an ex-spouse, child, or dependent.
How does the Qualified Joint and Survivor Annuity work?
The Qualified Joint and Survivor Annuity (QJSA) is part of some retirement plans that provide a guaranteed retirement benefit for the account holder (the employee) and a benefit for the surviving beneficiary (such as a spouse) after the death of the account holder. These amounts are usually paid monthly.
You can designate a spouse or another person as the beneficiary of the Qualified Joint and Survivor Annuity. If the beneficiary is an ex-spouse, child, or dependent, they are technically considered a surviving beneficiary under a Qualified Domestic Relations Order (QDRO). The amount paid by the Qualified Joint and Survivor Annuity to the beneficiary ranges from 50% to 100% of the amount paid during the lifetime of the retirement account holder.
Generally, Qualified Joint and Survivor Annuity payments begin when you reach the retirement age specified in your retirement plan and stop upon the death of the surviving spouse.
Plans that include the Qualified Joint and Survivor Annuity
Under federal law, a qualified retirement plan, such as a defined benefit plan or a money purchase plan, must offer Qualified Joint and Survivor Annuity benefits to all married participants.
Couples can choose other types of benefits, including single life annuities, joint life annuities, or a term certain. If you choose to waive the Qualified Joint and Survivor Annuity benefits, you and your spouse usually need to do so within 90 days of your payments beginning.
Enrolling in the Qualified Joint and Survivor Annuity
Generally, qualified retirement plans that include the Qualified Joint and Survivor Annuity do not require you to enroll in the plan as it is already included. The plan will send you a notice between 30 and 180 days before your plan begins. This notice will include:
- Terms and plans for the period
- What will happen if you waive the plan
- Details of the spouse’s or non-spouse beneficiary’s right to contest the waiver request by the retirement account holder
- Your right to revoke the waiver or election
Note: Generally, if the married participant dies before the Qualified Joint and Survivor Annuity payments begin, the surviving spouse must receive a Qualified Pre-retirement Survivor Annuity (QPSA).
Qualified Joint and Survivor Annuity and Divorce and Domestic Partnerships
However, if the participant and their spouse choose the Qualified Joint and Survivor Annuity and their marriage ends within 12 months, whether due to divorce or the participant’s death, the surviving spouse may not be entitled to the monthly survivor benefits. In this case, the marriage must have begun and ended within the 12-month period before the retirement payments begin.
If the plan participant is unmarried (single or has a domestic partner), the Qualified Joint and Survivor Annuity benefits do not apply. Instead, you will be entitled to a single life annuity, which pays regular amounts while you are living. Under federal law, your entitlement as an unmarried person is paid as a single life annuity unless you choose an alternative. Employers are not required to provide Qualified Joint and Survivor Annuity or Qualified Pre-retirement Survivor Annuity benefits to a domestic partner, but they can choose to provide them.
Example of Qualified Joint and Survivor Annuity
Suppose the survivor benefit amount for the Qualified Joint and Survivor Annuity is 50%, and your lifetime benefit is $500 per month. If you die before your spouse, they will receive $250 per month for the rest of their life. However, if your spouse dies before you, you will continue to receive the monthly amount of $500 for life.
Advantages
Qualified Joint and Survivor Annuity Pros and Cons
Advantages:
- Guaranteed lifetime payments for two individuals.
- May be supported by the employer.
Disadvantages:
- Typically requires the spouse’s consent for a large lump-sum payment.
- Offers lower monthly payments than a single-life annuity.
Alternatives to Qualified Joint and Survivor Annuity
You have several alternatives to a qualified joint and survivor annuity:
- Single-Life Annuity: Provides retirement benefits for you only, not your spouse or other beneficiary. These benefits cease upon your death.
- Joint-Life Annuity: Offers lifetime benefits for you, which after your death are transferred to someone else other than your spouse.
- Lump-Sum Payment: Instead of a series of benefits, the plan participant may choose to forgo the qualified joint and survivor annuity in favor of a lump-sum payment representing the entire proceeds of the retirement plan.
- Guaranteed and Continuous Annuity: Provides benefits for the rest of your life at a lower amount than a single-life annuity. If you die within five, ten, or fifteen years from the date your benefits begin, the designated beneficiary will receive benefits for the remainder of the “guaranteed” period. If you die after that period ends, benefits will cease.
Frequently Asked Questions (FAQs)
Which is better: Single-Life Annuity or Joint and Survivor Annuity?
In many cases, a single-life annuity may be better as it usually pays a larger monthly amount than a joint and survivor annuity. Payments are higher due to the shorter payment period for a single-life annuity.
What’s the difference between a joint annuity and a joint and survivor annuity?
A joint annuity pays lifetime benefits for both the plan participant and the surviving spouse. The joint and survivor annuity refers to the benefits of the joint annuity paid to your spouse after your death.
Source: https://www.thebalancemoney.com/what-is-a-qualified-joint-and-survivor-annuity-qjsa-7094007
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