What Is a Qualified Pre-Retirement Survivor Annuity?
Let me explain what a qualified pre-retirement survivor annuity, or QPSA, really is. It's a death benefit that gets paid out to the surviving spouse of an employee who passes away. If that employee dies before they start drawing retirement benefits, the QPSA steps in to compensate the spouse for those lost benefits. Remember, this only applies to qualified plans, as the name suggests.
Key Takeaways
You should know that a QPSA delivers monetary payments to the surviving spouse of a deceased employee. For this to happen, the employee has to be part of a qualified plan. The Employee Retirement Income Security Act, or ERISA, sets the rules on how these payments get calculated. There are specific guidelines for paying survivor benefits to anyone who's not a spouse. And if a plan offers a QPSA, they must send out a notice about it.
Understanding QPSA
A QPSA is essentially a mechanism for you to secure benefits for your surviving spouse or another beneficiary if you die before your retirement benefits kick in. These benefits are required in all qualified plans for vested participants, including things like defined-benefit plans and money purchase plans.
ERISA dictates exactly how QPSA payments are figured out. Both you and your spouse need to sign a waiver if you're opting out of these benefits, and it has to be witnessed by a notary or an authorized plan rep.
Sometimes, you'll need a Qualified Domestic Relations Order, or QDRO. This is a court order that directs a retirement plan to pay out for child support, alimony, or property rights to a spouse, child, or other dependent.
As the IRS defines it, a QPSA is a death benefit paid as a life annuity—a series of usually monthly payments for life—to the surviving spouse, or under certain conditions to a former spouse, child, or dependent via a QDRO, provided specific requirements are met.
Fast Fact
Here's a quick note: A QPSA offers protection to the surviving spouse through monthly payments that last for their lifetime.
Special Considerations for a QPSA
For QPSA payments to go through, the participant must have vested benefits and must have died before retirement. If it's the spouse receiving them, you two need to have been married for at least one year.
Certain qualified plans might not have to provide a QPSA to a surviving spouse. This applies to defined-contribution plans that don't offer a life annuity option or that mandate the full benefit be paid directly to the spouse.
If the plan does offer a QPSA, they have to send you a notice about it. This notice comes when you're between 32 and 35 years old, or within one year of becoming a participant if you're over 35.
Other articles for you
Target-date funds automatically adjust investments from aggressive to conservative as retirement approaches, simplifying long-term savings.
This text explains the roles and functions of investment banks in facilitating major financial transactions and providing advisory services.
Economic sectors categorize businesses by similar activities, aiding analysis of economic performance and investment decisions.
This text explains the fundamentals of day trading, including definitions, practices, strategies, risks, and steps to begin a career in it.
A wirehouse is a historical term for full-service broker-dealers that evolved from wired networks to modern internet-based financial institutions offering comprehensive services.
The Bretton Woods Agreement established a post-WWII international monetary system pegging currencies to the U.S
Qualified reservists can withdraw from certain retirement accounts without the usual early penalty when called to active duty.
A tracking stock is a specialized equity issued by a parent company to track the performance of a specific division, trading separately from the parent's stock.
Overnight trading allows investors to execute trades outside regular market hours, offering opportunities but with risks like low liquidity and high volatility.
XRT refers to a stock ticker extension indicating ex-rights trading and also to an ETF tracking U.S