Qualified Joint and Survivor Annuity (QJSA) and QOSA: Notice and Waiver

A qualified joint and survivor annuity, or QJSA, is the default form of retirement payment for married participants in most employer pension plans: it pays a monthly benefit for the participant’s lifetime and then continues a reduced monthly benefit to the surviving spouse for the rest of that spouse’s life. Federal law under ERISA and the Internal Revenue Code makes this the automatic payout unless the participant formally waives it with the spouse’s written, witnessed consent. The rule exists to keep a spouse from being left with nothing when the person who earned the pension dies.

Which Retirement Plans Have to Offer One

Not every employer plan is subject to the QJSA rules. Internal Revenue Code Section 401(a)(11) requires it for three categories of plans.¹ All defined benefit plans (traditional pensions) must offer a QJSA, without exception. Defined contribution plans that are subject to minimum funding standards, most commonly money purchase pension plans, must offer one. And other defined contribution plans, including some 401(k) and profit-sharing plans, fall under the rule if they do not qualify for an automatic exemption.

A 401(k) or profit-sharing plan can skip QJSA treatment entirely if three conditions are met: the plan pays the participant’s full vested balance to the surviving spouse at death, the participant has not elected a life annuity, and the plan received no transferred assets from a defined benefit or money purchase plan.¹ Most large 401(k) plans are built to qualify for that exemption, which is why the default in those plans is typically a lump sum or installments rather than an annuity.

Governmental plans and church plans that have not elected ERISA coverage sit outside these rules entirely.² State, county, and municipal pension plans, along with church-run retirement plans, are not required to provide a QJSA or the pre-retirement version described below. Some voluntarily follow ERISA-style spousal protections; many do not. Read the plan documents directly rather than assuming federal survivor annuity rules apply.

How the Survivor Percentage Works

The survivor percentage is the share of the monthly benefit that continues to the spouse after the participant dies. Federal law requires the QJSA survivor annuity to be at least 50% and no more than 100% of the amount paid while both spouses are alive.³ A plan with a 50% QJSA pays the full monthly benefit while both spouses live, then drops to half for the surviving spouse.

A higher survivor percentage means more income for the surviving spouse but a smaller monthly check while both spouses are alive, because the cost of a longer-lasting benefit gets built into the initial amount. This trade-off catches people off guard. A 100% survivor annuity sounds generous until you realize your monthly payment during retirement may be noticeably smaller than under a 50% option.

The QOSA: A Required Second Option

Every plan that offers a QJSA must also offer a qualified optional survivor annuity, or QOSA, at a different survivor percentage. The QOSA percentage depends on the plan’s standard QJSA. If the plan’s QJSA survivor percentage is below 75%, the QOSA must offer 75%. If the plan’s QJSA is 75% or higher, the QOSA must offer 50%.³ A plan with a standard 50% QJSA must therefore offer a 75% QOSA, and a plan with a standard 100% QJSA must offer a 50% QOSA. The point is to give participants access to both a higher and a lower survivor option.

The QJSA Notice and Relative Value Disclosure

Before a participant can elect anything other than the QJSA, the plan administrator must deliver a written explanation covering the terms of the QJSA, the right to waive it, the effect of waiving it, and the spouse’s right to consent or refuse. This QJSA notice must arrive within 180 days before the annuity starting date.

The notice has to include a comparison showing the relative economic value of each available payment option against the QJSA, in a form that does not require the participant to run calculations using interest rates or mortality tables.⁴ Plans can express the comparison as a percentage of the QJSA’s value, as an equivalent annuity amount, or as the present value of each option. The notice must disclose the interest rate used and include a general warning that the projections rely on average life expectancies rather than the participant’s actual situation.

Options within 95% to 105% of the QJSA’s value can be described as “approximately equal in value,” and plans can group options that differ by no more than 5 percentage points under a single representative value.⁴ If the plan used estimates or assumptions, such as an assumed spouse age, it must flag that and offer a more precise calculation on request.

Read this disclosure carefully. The relative value comparison is often the single most useful number in the entire packet, and it is the one most people skip. A lump sum that sounds impressive in raw dollars may represent only 85% of the QJSA’s actuarial value.

How to Waive the QJSA

Electing anything other than the QJSA requires the participant to formally waive it during the election period, which can start up to 180 days before the annuity starting date. The participant generally must have at least 30 days after receiving the QJSA notice before the waiver takes effect, though a participant can shorten that and elect a distribution as soon as 7 days after receiving the notice.

Spousal Consent

The waiver is not valid without the spouse’s written consent. The consent form must identify the specific alternative benefit form being chosen or the specific non-spouse beneficiary being named. A general, open-ended consent to “whatever the participant decides” does not satisfy the requirement.

The spouse’s signature must be witnessed by either a notary public or an authorized plan representative who is physically present.⁵ The IRS has proposed regulations that would allow remote online notarization as an alternative to in-person witnessing, but those rules have not been finalized.⁶ Until they are, plan on appearing in person before a notary or plan representative.

Revocation and the Hard Deadline

A participant can change the election at any time during the election period. If you waive the QJSA on Monday and reconsider on Wednesday, you can switch back, and you never need spousal consent to return to the QJSA.⁷ Switching from one alternative to a different alternative does require fresh spousal consent.

The rules for spouses are less generous. A plan is allowed to make spousal consent irrevocable once given. Some plans do let a spouse revoke consent, which would cancel the participant’s waiver and restore the QJSA, but no plan is required to offer that option.⁷ A spouse who signs the consent form should treat it as permanent unless the plan documents clearly say otherwise.

Once the annuity starting date arrives, even if the first check has not been mailed yet, the plan must pay in the form that was elected. You cannot go back and choose a different payment structure after that point.⁷ Treat the annuity starting date as the deadline it is.

If the Participant Dies Before Retirement: The QPSA

The QJSA protects a spouse after retirement begins. A separate rule, the qualified pre-retirement survivor annuity (QPSA), protects a spouse if the participant dies before the annuity starting date. Any plan subject to the QJSA rules must also provide a QPSA to the surviving spouse of a vested participant who dies too early to have started benefits.⁸

If the participant died after reaching the plan’s earliest retirement age, the surviving spouse receives what they would have received under a QJSA had the participant retired the day before death. If the participant died before that age, the calculation assumes the participant separated from service at death, survived to the earliest retirement age, retired with a QJSA then, and died the following day. Either way, payments to the surviving spouse begin no later than the month the participant would have reached the plan’s earliest retirement age.⁸

For individual account plans that are subject to survivor annuity rules, the QPSA takes a simpler form: a life annuity for the surviving spouse worth at least 50% of the participant’s vested account balance at death.⁸ The QPSA can be waived, but the actual waiver election period does not open until the first day of the plan year in which the participant turns 35, and any earlier waiver expires at that point unless renewed.⁷ Plans can also require that the participant and spouse were married for at least one year before the earlier of the annuity starting date or the participant’s death.

Divorce, Former Spouses, and QDROs

Divorce does not automatically cut off a former spouse’s claim to survivor benefits. A qualified domestic relations order (QDRO) issued as part of a divorce can require the plan to treat a former spouse as the participant’s surviving spouse for QJSA and QPSA purposes.⁹ When that happens, a new spouse the participant marries later cannot be treated as the surviving spouse for those benefits.

A QDRO can divide retirement benefits in two ways. Under a shared payment approach, the former spouse receives a portion of each payment made to the participant. Under a separate interest approach, the benefit is split into two independent portions, and the former spouse may be able to begin receiving their share at a different time and in a different form than the participant.¹⁰

If a QDRO awards survivor benefits to the former spouse, the participant cannot waive the QJSA or QPSA without the former spouse’s consent. The divorce decree and the QDRO must be specific about the survivor benefit. Vague language about “dividing the retirement account” without mentioning survivor annuity rights can leave both the former and current spouse in a difficult position.¹¹ A QDRO also cannot require a plan to pay benefits as a joint and survivor annuity for the former spouse and their new partner.

Taxes on Payments and Lump Sums

Monthly payments from a QJSA are taxed as ordinary income in the year received. If the participant never made after-tax contributions to the plan, the full payment is taxable. If the participant did contribute after-tax dollars, a portion of each payment representing the return of those contributions comes back tax-free, and the IRS simplified method is used to calculate the split.¹²

Choosing a lump sum instead triggers different consequences. If you take the cash directly, the plan must withhold 20% of the taxable amount for federal income taxes, even if you plan to roll it over yourself within 60 days. The only way to avoid the mandatory withholding is to elect a direct rollover to an IRA or another qualified plan.¹²

Participants under age 59½ who take distributions also face a 10% early withdrawal penalty on top of regular income tax, unless an exception applies. Common exceptions include distributions due to death, disability, or separation from service after reaching age 55. Regular QJSA annuity payments do not automatically qualify for an exception just because they are in annuity form; they still need to meet one of the listed criteria if the participant is under 59½.¹³

When the Plan Fails to Get Valid Consent

If a plan pays benefits to a married participant in any form other than a QJSA without valid spousal consent, the plan has an operational qualification defect. Left uncorrected, the failure can cost the plan its tax-qualified status, which would harm every participant in the plan.¹⁴

The standard correction requires the plan sponsor to contact the affected participant and spouse and obtain retroactive consent. If the spouse refuses, cannot be located, or does not respond, the spouse keeps the right to claim the survivor benefit they would have received under a QJSA, and the plan must pay it if a claim is made.¹⁴ As an alternative, the plan can offer the spouse a choice between the ongoing survivor benefit or a lump sum equal to its present value.

For a spouse who was never asked to sign or whose consent form was defective, the practical point is this: the error falls on the plan, and the spouse’s claim survives the mistake.

1
Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans
2
Office of the Law Revision Counsel. 29 USC 1003 – Coverage
3
Office of the Law Revision Counsel. 26 USC 417 – Definitions and Special Rules for Purposes of Minimum Survivor Annuity Requirements
4
eCFR. 26 CFR 1.417(a)(3)-1 – Required Explanation of Qualified Joint and Survivor Annuity and Qualified Preretirement Survivor Annuity
5
Internal Revenue Service. Internal Revenue Bulletin 2023-4
6
Federal Register. Use of an Electronic Medium To Make Participant Elections and Spousal Consents
7
eCFR. 26 CFR 1.401(a)-20 – Requirements of Qualified Joint and Survivor Annuity and Qualified Preretirement Survivor Annuity
8
Office of the Law Revision Counsel. 29 USC 1055 – Requirement of Joint and Survivor Annuity and Preretirement Survivor Annuity
9
Office of the Law Revision Counsel. 26 USC 414 – Definitions and Special Rules
10
U.S. Department of Labor. QDROs: The Division of Retirement Benefits Through Qualified Domestic Relations Orders
11
U.S. Department of Labor. Qualified Domestic Relations Orders Under ERISA: A Practical Guide to Dividing Retirement Benefits
12
Internal Revenue Service. Topic No. 410, Pensions and Annuities
13
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
14
Internal Revenue Service. Fixing Common Plan Mistakes – Failure to Obtain Spousal Consent