Rev. Rul. 81-9

1981-1 C.B. 178, 1981-2 I.R.B. 7.

                       Internal Revenue Service
                                 Revenue Ruling

                          JOINT AND SURVIVOR ANNUITIES

                          Published: January 12, 1981

  Joint and survivor annuities. Situations illustrate the requirements of section 401(a)(11) of the Code, and the regulations thereunder, relating to qualified joint and survivor annuities.

  Advice has been requested whether the plans in the situations described below meet the requirements of section 401(a)(11) of the Internal Revenue Code and the regulations thereunder relating to qualified joint and survivor annuities.

  Situation 1.  A plan provides for the payment of benefits in the form of a life annuity.  Employee A, otherwise qualified to receive plan benefits, retires at the plan's early retirement age of 55, but elects to defer the commencement of annuity payments until age 65.  A dies at age 60 before receiving any benefits under the plan and is survived by his spouse does not elect to have benefits commence at any deferred date, may the plan also defer the commencement of survivor benefits to A's spouse until the time A would have attained age 65?

  Held, No.  The survivor benefit in such case must be immediately payable upon the death of the participant, unless the employee makes an election out of the joint and survivor annuity that complies with section 1.401(a)-11(c)(1) of the Income Tax Regulations.  Section 1.401(a)-11(a)(1)(i)(D) of the regulations requires that a plan provide that any benefit which may be paid in any form of a life annuity shall be paid in a form having the effect of a qualified joint and survivor annuity with respect to participants who are otherwise entitled to such benefits and who die after separation from service subsequent to attainment of the normal retirement age (or the qualified early retirement age) but before beginning to receive such benefits.

  Situation 2.  A terminated plan pays benefits in the form of a life annuity.  Will the plan be qualified under section 401(a) of the Code if it fails to offer benefits in the joint and survivor annuity form?

  Held, No.  In the case of a terminated plan, benefits must be paid in the form of a qualified joint and survivor annuity, unless an election has been made otherwise, to participants whose benefits commence after they have attained the qualified early retirement age or normal retirement age.  See section 1.401(a)-11(a)(1)(i) of the regulations.  After the date of termination such plan need not provide an election that meets the requirements of section 1.401(a)-11(c)(1) nor provide information to participants in accordance with section 1.401(a)-11(c)(3).

  Situation 3.  May a plan that is required to provide an early survivor annuity within the meaning of section 1.401(a)-11(b)(3) of the regulations discontinue this coverage after the plan is terminated?

  Held, Yes.  Section 411(d)(3) of the Code provides that upon the termination of a trust qualified under section 401(a) the rights of all affected employees to all benefits accrued to the date of such termination are nonforfeitable.  In general, the term "accrued benefits" refers only to pension or retirement benefits and does not include pre-retirement death benefits.  See section 1.411(a)-7(a) of the regulations.

  Accordingly, early survivor coverage need not be continued for participants who continue in employment with the employer after the plan has been terminated.

  Situation 4.  A plan provides that the normal form of benefit is a qualified joint and survivor annuity.  The plan also provides a single life annuity to an unmarried person.  Must the normal form of benefit payable as a joint and survivor annuity be the actuarial equivalent of the single life annuity?

  Held, No.  Section 1.401(a)-11(b)(2) of the regulations only requires that a qualified joint and survivor annuity be at least the actuarial equivalent of the normal form of life annuity or, if greater, any optional form of life annuity offered under the plan.  This rule applies whether or not the benefits provided under the life annuity are at the maximum level under section 415 of the Code.

  Situation 5.  A plan provides a qualified joint and survivor benefit at normal retirement age.  The plan provides disability benefits and also provides an early retirement benefit as well as the right to elect an early survivor annuity.  If a participant begins to receive the payment of disability benefits on or after the qualified early retirement age must any portion of the disability benefits be offered in the form of a qualified joint and survivor annuity?

  Held, No.  Unless the participant makes an election described in section 1.401(a)-11(c)(1)(i) of the regulations not to have benefits payable in the form of a qualified joint and survivor annuity, any benefits commencing after the qualified early retirement age must be payable in that form.  See section 1.401(a)-11(a)(1)(i)(C) of the regulations.  However, the disability benefit may be merely another optional benefit form not payable in the form of a qualified joint and survivor annuity.  The optional disability benefit may not, however, have a value greater than that of the qualified joint and survivor annuity payable after the qualified early retirement age.

  Situation 6.  A plan does not specify an early retirement date nor does it provide for an early retirement benefit.  However, the plan does provide for disability retirement benefits.  Normal retirement benefits are payable at age 65.  Must such a plan offer the election of an early survivor annuity?

  Held, No.  Section 1.401(a)-11(a)(1)(ii) of the regulations states that if a plan which provides a life annuity provides for the payment of benefits before the normal retirement age, such benefits must be payable as an early survivor annuity, if the participant so elects, in the event the participant attains the qualified early retirement age and dies on or before normal retirement while still employed by the employer maintaining the plan.  Section 1.401(a)-11(b)(4) defines qualified early retirement age as the latest of (1) the earliest date a participant could elect to receive retirement benefits (other than disability benefits), (2) the first day of the 120th month beginning before the participant reaches normal retirement age, or (3) the date the participant begins plan participation.  In this case, because the qualified early retirement age cannot precede the normal retirement age, early survivor annuity coverage need not be provided.

  Situation 7.  A plan is not required to provide an election of an early survivor annuity if it is a defined contribution plan which provides a survivor benefit to the spouse at least equal to the vested portion of the participant's account balance with respect to a participant who dies while in active service with an employer maintaining the plan.  See section 1.401(a)-11(c)(2)(i)(C)(2) of the regulations.  May the plan provide for optional payments other than to the surviving spouse?

  Held, Yes.  The plan provides a survivor benefit within the meaning of section 1.401(a)-11(c)(2)(i)(C)(2) of the regulations if the only form of benefit or one of a choice of benefits by the participant's spouse.  The plan may, however, provide for optional payments to beneficiaries other than the surviving spouse.

  Situation 8.  A plan provides a benefit to the participant or surviving spouse of $300 per month for 120 months.  Thereafter, a benefit of $300 per month will be paid to the participant for life.  Furthermore, if the participant predeceases the participant's spouse a benefit of $150 per month for life will be paid to the surviving spouse.  If both the participant and spouse die before the end of the 120-month period, payments of $300 per month for the remainder of the 120-month period will be made to the designated beneficiaries.  Under the plan, there is no other benefit of higher actuarial value.  Does this plan satisfy the requirements of a qualified joint and survivor annuity?

  Held, Yes.  Annuities with guaranteed payment features for the survivor portion may be a qualified joint and survivor annuity provided the survivor portion of the annuity is neither less than one-half of nor greater than the amount of the annuity paid to the participant and the spouse during their joint lives and the actuarial value of the joint and survivor annuity is not less than the value of the normal form of life annuity or, if greater, of any optional form of life annuity offered under the plan.  See section 1.401(a)- 11(b)(2) of the regulations.

  Situation 9.  A plan contains a normal retirement age of 65.  The plan does not specify an early retirement age at which an employee may elect to retire and receive benefits but does provide for the immediate payment of vested benefits to all participants who separate from service prior to normal retirement age.  Employee A begins participation in the plan at age 25.  At age 55, A is still employed by the same employer and desires to elect an early survivor annuity.  Must the plan provide A with an early survivor annuity election?

  Held, Yes.  Section 1.401(a)-11(a)(1)(ii) of the regulations requires that if a plan provides for the payment of benefits prior to normal retirement age it must provide that such benefits are payable as an early survivor annuity in the event a participant who has attained the qualified early retirement age dies on or before normal retirement age while employed by an employer maintaining the plan.  Section 1.401(a)-11(b)(4) defines qualified early retirement age as the latest of (1) the earliest date a participant may elect to receive benefits under the plan, (2) the first day of the 120th months beginning before the participant reaches normal retirement age, or (3) the date the participant begins plan participation.  In this case employee A attained the qualified early retirement age at 55 and is still employed by the employer maintaining the plan.  Accordingly, A must be afforded the opportunity to elect an early survivor annuity.

Rev. Rul. 81-9, 1981-1 C.B. 178, 1981-2 I.R.B. 7.