This past year has left many wondering about the longevity of their retirement account. While researching some options, I stumbled across a particular option that must be provided to married participants of a pension plan or profit sharing plan. A Qualified Joint and Survivor Annuity, QJSA, and a Qualified Preretirement Survivor Annuity, QPSA, are options within these plans that may be a beneficial option for some plan participants. A QJSA would pay a retirement benefit to a participant and their spouse for as long as they live. Depending on the plan document, after the death of the first spouse, the QJSA would continue to provide either 50 to 100 percent of the original benefit. Since the benefit covers the entire life of the both spouses, the payments received from the QJSA are less than the benefit if only the participant’s life were covered. Once the participant retires, the nonparticipant spouse may elect to waive their right to the QJSA before benefits are received.

A QPSA provides a benefit to the nonparticipant spouse in the event the participant dies before reaching normal retirement age. The QPSA is easily compared to a term-insurance policy on the participant’s life. If this option is elected, assets within the retirement plan will be used to fund the QPSA. The spouse is able to waive their right to a QPSA once the participant spouse reaches age 35. Any benefit received from the QPSA is taxed as ordinary income and is included in the estate tax of the decedent.

If a married couple believes that this may be a beneficial option for their retirement, a few things must be considered. The couple should review their retirement plan to ensure a QJSA and QPSA are offered. A plan does not have to offer the QJSA or the QPSA if the plan already provides the surviving spouse with the entire nonforfeitable accrued benefit. This option must be given to the surviving spouse within 90 days following the participant’s death, and the account is adjusted for any gains or losses. This is a pretty complicated issue regarding retirement plans, and may only be beneficial for a particular financial situation. Please review the terms with a trusted financial adviser.