April 17, 2000 – The IRS releases Revised Regulations Concerning Disclosure of Relative Values of Optional Forms of Benefit, adding a sentence to the end of Treas. Reg. 1.401(a)-20, Q&A-16; adding a sentence to the end of Treas. Reg. 1.401(a)-20, Q&A-36; and revising Treas. Reg. 1.417(a)(3)-1. The final regulations are effective March 24, 2006 and impose content requirements on explanations of qualified joint and survivor annuities and qualified preretirement survivor annuities payable under certain retirement plans.
Code section 417(a)(3) and ERISA section 205(c)(3) require a plan to provide each participant, within a reasonable period before the annuity starting date, a written explanation that includes:
- 1) the terms and conditions of the qualified joint and survivor annuity (QJSA);
- 2) the participant’s right to make an election to waive the QJSA form of benefit;
- 3) the effect of such an election;
- 4) the rights of the participant’s spouse; and
- 5) the right to revoke an election to waive the QJSA form of benefit.
In 1988, the IRS issued Treas. Reg. 1.401(a)-20, Q&A-36. It required that the Code section 417(a)(3) written explanation must contain a general description of the eligibility conditions and other material features of the optional forms of benefit available under the plan, including sufficient information explaining the relative values of the optional forms of benefit available under the plan.
On Dec. 17, 2003, the IRS issued final regulations under Code section 417(a)(3) regarding disclosure of the relative value and financial effect of optional forms of benefit as part of the QJSA explanations provided to participants receiving qualified plan distributions. They were generally effective for QJSA explanations provided with respect to annuity starting dates beginning on or after Oct. 1, 2004.
In response to commenters requesting the effective date be postponed, the IRS issued Announcement 2004-58, postponing the effective date of the 2003 regulations.
On Jan. 28, 2005, the IRS issued proposed regulations stating that the 2003 regulations were generally effective for QJSA explanations provided with respect to annuity starting dates beginning on or after Feb. 1, 2006. These regulations finalize the 2005 proposed regulations.
On May 8, 2006, the IRS issues a correction to Treas. Reg. 1.417(a)(3)-1, stating:
2. Section 1.417(a)(3)-1(c)(5)(ii)(B) is amended by removing the language “Similarly, a participant is entitled” and adding the language “Similarly, if a participant is entitled”.