Qualified Joint and Survivor Annuity (QJSA)

A Qualified Joint and Survivor Annuity (QJSA) is a retirement benefit option that provides lifetime income to a plan participant and a survivor (typically a spouse, but can be a child or dependent) from a qualified retirement plan. QJSAs are commonly associated with defined benefit plans, money-purchase pension plans, target benefit plans, and may apply to profit-sharing, 401(k), or 403(b) plans if the plan document elects to offer them.

Key takeaways

• A QJSA pays lifetime income to both a participant and a designated survivor.
• The survivor’s benefit must generally be at least 50% and no more than 100% of the participant’s benefit.
• Married participants must be offered a QJSA as the default form of benefit unless the spouse gives written consent to another form.
• QJSAs are usually irrevocable once distributions begin and may not be appropriate if the participant has limited life expectancy or needs flexible access to funds.

How a QJSA works

• Plan documents determine the exact payout formula and available survivor percentage, but federal rules require the survivor annuity to fall within the typical 50%–100% range of the primary benefit.
• Payments are normally made at regular intervals (most often monthly) for the lifetime of the participant and continue for the lifetime of the designated survivor at the agreed survivor percentage.
• Once QJSA payments begin, the payment schedule and survivor percentage generally cannot be changed and additional lump or ad hoc distributions are not permitted.

Legal and procedural points

• Federal tax rules require qualified plans (such as defined benefit, money-purchase, or target benefit plans) to offer QJSAs to married participants as the default option unless the spouse consents in writing to a different form of benefit.
• Spousal consent must typically be documented in writing and may need to be witnessed by a plan representative or notarized, depending on plan rules.
• A plan may make a lump-sum distribution without spousal consent if the value is de minimis (commonly $5,000 or less, depending on plan provisions).
• Divorce may change survivor-designation obligations: a qualified domestic relations order (QDRO) or divorce decree can require treating a former spouse as the current spouse for benefit purposes. To update survivor beneficiaries after divorce, participants should contact the plan administrator.

Considerations before choosing a QJSA

• Longevity protection: QJSAs provide guaranteed lifetime income and protect a surviving spouse from loss of retirement income.
• Opportunity cost: Converting an account balance into a QJSA may forgo potential higher returns from investments or limit estate transfers to heirs.
• Health and life expectancy: If the participant’s life expectancy is short, purchasing a lifetime annuity may be less advantageous than taking a lump sum or another distribution form.
• Inflation risk: Unless the annuity includes cost-of-living adjustments, fixed monthly payments can lose purchasing power over time.
• Flexibility: QJSAs typically limit access to the underlying principal and do not allow additional withdrawals once payments start.

Example

A 401(k) plan offers a QJSA that pays $1,500 per month to a participant starting at age 65, with a 66% survivor option. If the participant dies first, the surviving spouse would receive $1,000 per month (66% of $1,500) for life. The participant could opt for a different distribution form only if the spouse signs a written consent acknowledging and permitting that change.

Where to find the rules

QJSA requirements and related guidance are set out in IRS rules and federal tax regulations (see 26 CFR § 1.401(a)-20). Plan documents and plan administrators can provide the specific options, payout factors, and consent procedures applicable to a particular retirement plan.