Spousal consent for qualified retirement plans has been in the spotlight recently as a result of the COVID-19 pandemic. In response to the temporary lockdowns in 2020, and the extended period of social distancing that followed, the IRS began to permit electronic consent rather than the standard requirement for a consenting spouse to sign in the presence of a notary public. Under this temporary accommodation, as long as the consent is provided through an electronic system which meets certain standards, the spouse is not required to be physically present in front of the notary when giving that consent. The IRS has most recently extended the relief from the physical presence requirement through December 31, 2022 in Notice 2022-27. The IRS is now considering making this accommodation permanent. This is a good excuse to review when spousal consent is required under a qualified retirement plan.
What is Spousal Consent?
Spousal consent is the spouse of a married participant formally agreeing to some action, taken by the participant, that affects the participant’s qualified retirement plan account. That consent is generally given by completing and signing a section of an applicable administrative form and having that consent notarized by a licensed notary, or witnessed by a plan representative. Spousal consent is only required in certain situations.
When is Spousal Consent Required?
- Some Plans Require Spousal Consent for Certain Distributions. Plans with Qualified Joint & Survivor Annuities (QJSAs) and Qualified Pre-Retirement Survivor Annuities (QPSAs) require that a married participant’s spouse consent to any change to an optional form of benefit payment offered under the plan, such as a lump sum or installments, rather than the normal form of benefit payment, an annuity with survivor benefits. In addition, spousal consent is required for any in-service distributions or loans from the participant’s account, as these actions could affect the survivor benefit due to the spouse.
- Some Plans Do Not Require Spousal Consent for Distributions. Plans not subject to the QJSA and QPSA requirements, like most profit sharing and 401(k) plans, usually don’t require spousal consent for changes to form of distribution, in-service distributions, or loans. However, it is important to review the plan documents to make sure this is what your plan says. Plans that previously included QJSA and QPSA provisions may still retain vestigial spousal consent requirements.
- Spousal Consent is Always Required When Changing a Beneficiary. In all types of qualified retirement plans, even if there are no QJSAs and QPSAs, there is a requirement that a spouse give consent if a married participant is changing the designated beneficiary to someone other than the spouse. The spouse is the default beneficiary for married participants.
Bottomline: Check Your Plan
Always check your plan for spousal consent requirements and make sure you know what your plan provides. It is also a good idea to review any spousal consents on file, to ensure that you can correct any incomplete forms before any significant times goes by and correction becomes more complicated.