In December of 2003, the IRS published new regulations governing qualified joint and survivor annuity (QJSA) explanations.  Under these regulations, plans subject to the QJSA rules must provide enhanced disclosure of the relative values and financial effects of the optional forms of benefits offered by the plan.  Plan sponsors and administrators of defined benefit plans and defined contribution plans subject to the QJSA rules need to make sure they are making a reasonable, good faith effort to comply with the new requirements now.

The 2003 regulations were scheduled to go into effect for annuities starting on or after October 1, 2004, but the IRS postponed the effective date so that the enhanced disclosure requirement would not apply to certain QJSA explanations.  The 2004 effective date continued to apply only to single sum payouts and other optional forms subject to the special Code Section 417(e)(3) rules for determining present values, and then only if the actuarial present value of the optional form of benefit is less valuable than the actuarial present value of the QJSA.

Proposed regulations issued in January of 2005 indicated that the enhanced disclosure requirements would become applicable for all QJSA explanations starting February 1, 2006.  However, the IRS was not able to finalize the 2005 proposed regulations before February 1, 2006, and so they recently (and quietly) announced another postponement of the effective date.  In the Winter 2006 issue of Employee Plans News, the IRS indicated that the final regulations, when published, are expected to provide that a reasonable, good faith effort to comply with the 2003 regulations will be deemed to satisfy the enhanced disclosure requirements for QJSA explanations provided before January 1, 2007.  Note, however, that full technical compliance with the 2003 regulations continues to be required with respect to QJSA explanations for certain single sums and other optional forms described above that remained subject to the original 2004 effective date. 

The title above says it all.  Although the effective date is being extended, it's time for plan sponsors and administrators of defined benefit plans and defined contribution plans subject to the QJSA rules to start complying with the more rigorous relative value and financial effect disclosure requirements set out in the 2003 regulations.

For questions about this alert or any other labor/benefits issues, please contact Gene Griggs at ggriggs@poynerspruill.com or 704.342.5264 or Susie Gibbons at sgibbons@poynerspruill.com or 919.783.2813.