Qualified Joint and survivor Annuity question

[SLYKTAX]

My wife retired from a bank 7 years ago with small pension and SSI payments.  She had contributed to 401K during her employment. She will be 72 by the end of this year and is required to take her 1st RMD from her 401K. I am retired and have my own pension and 457 retirement account as well that need RMD as well.

The custodian of her 401K fund just sent her a notice and form to take her first RMD. It is difficult to understand the language when a sentence is long.

There is a QJSA Spousal Waiver that I need to sign which I don’t understand why because my 457 account didn’t require the same thing. The statement stated:

I am the participant’s spouse --------, I realized that the participant cannot waive this spousal benefit and receive annual required minimum distribution as described in the explanation unless I consent. I acknowledge that the annual RMD transection may reduce or eliminate any benefit otherwise payable to me.  I voluntarily consent to the participant’s waiver and acknowledge that this will authorized the request for annual RMD payments including future RMDs.

Both of us have Joint 50% survival annuity in our pensions plan.  As I understand 401K & 457  is not a pension plan but a supplementary to it.

What is “that the participant cannot waive this spousal benefit and receive annual required minimum distribution ----- ”  Can someone explain what that mean please.  And why my 457 did not ask her to sign my RMD.

[tagteam]

@dmertz ??

[Bsch4477]

Her plan is apparently subject to QJSA rules which require distribution as an annuity unless the spouse agrees to the RMD in cash. 

[dmertz]

A governmental 457(b) plan is not subject to ERISA, so no spousal consent is required with respect to a governmental 457(b).

Since the 401(k) plan is subject to ERISA and this plan offers a QJSA, spousal consent is required to decline the annuity and pay RMDs over the employee's lifetime instead (at least until such time that a QJSA is elected).  Among other things, ERISA ensures that that a spouse cannot be cut out of the plan benefit without the spouse's consent.

[Opus 17]

Basically, it's government protection that a spouse can't drain an account without the other spouse's knowledge and permission.   You need to provide permission for your spouse to get cash out of the account.  (Otherwise, half would go to your spouse and half to you.)

[SLYKTAX]

Make sense what you guys said. Thank you. 

So if I sign the weaver - that means she can just drains the account (instead of taking the limited RMD per year)  leaving nothing for me in the future?  

[Opus 17]

@SLYKTAX 

You may need to check with the broker. From the language you quoted (and remember I can’t see it myself) it sounds as though you are being asked to waive your ERISA rights for all future distributions.  It should be possible to waive your ERISA rights one distribution at a time, if that makes you more comfortable.  In other words, a one time approval rather than a blanket future approval.

Also to clarify: an RMD is not a single special transaction.  It is a dollar amount that you, or in this case your spouse, is required to withdraw over the course of the year based on the account balance and their life expectancy. They can withdraw more if they want, to spend for any reason. But they must withdraw at least the minimum amount sometime during the year. For example, suppose your spouse were to withdraw $500 per month for living expenses. If the RMD is $4000, then it will have already been satisfied by the monthly withdrawals and an additional separate “RMD“ withdrawal is not needed. 

With that clarification, you will want to be aware of what you are signing. If you are being asked to waive your ERISA rights for all future withdrawals, that would allow your spouse to leave or divorce you and fully withdraw the account, even though a divorced spouse is usually entitled to a share of protected retirement accounts like this.  Of course, we never expected these things to happen to us, and if you have your own retirement accounts, it may not be a worry even if the unexpected were to happen.

All this commentary is to simply try to help you understand what you are being asked to sign. (Some types of plans are not covered by ERISA and so the approval of the other spouse is not needed.)

[SLYKTAX]

Thank you for the explanation.