Spousal Consent Rules and Marriage Contracts

The QPSA/QJSA benefit does not have to be paid only if (1) the participant elects to waive the particular benefit and (2) such waiver is consented to by the participant's spouse. Therefore, no action with respect to the benefits, such as a rollover to an IRA or a loan securitized by plan benefits, can be taken without a waiver and consent by the non-participant spouse. However, once rolled-over funds are in an IRA, there are no further spousal rights because REA rights do not extend to IRAs.

The consent to waiver of a QPSA or QJSA must:

1. specify the specific non-spouse beneficiary to receive the benefit or, alternatively, expressly agree that the participant may name or change beneficiaries without further spousal consent;

2. acknowledge the effect of the election; and

3. be witnessed by a plan representative or notary public. 

The QPSA may be waived only after the participant reaches the age of 35. An earlier waiver may be made, but it will become ineffective at age 35. This anomaly causes some interesting timing issues where a younger participant, i.e., younger than thirty-five, desires that his or her spouse waive the QPSA because, in order to have effect, that waiver may have to be made twice. 

However, a plan may provide for a waiver (with spousal consent) by a participant who is younger than thirty-five, provided that the participant receives a written explanation of the QPSA. Such a waiver becomes invalid upon the beginning of the plan year in which the participant's thirty-fifth birthday occurs. If there is no new waiver after such date, the participant's spouse must receive the QPSA benefit upon the participant's death. The QJSA may be waived only within ninety days of when benefits are scheduled to begin, and no later than when the benefits begin.

Therefore, even where the spouse has previously consented to a waiver of the QPSA, once the participant retires and wishes to rollover or take regular distributions from the plan (other than in a QJSA), another waiver and consent will be necessary.

The next question then becomes how does one obtain a binding waiver?  The sad answer is that the parties have to negotiate the waiver in advance of the wedding for what will happen immediately after the non-participant becomes a spouse. This is because one cannot execute a valid and binding waiver as a prospective spouse, as well as at the key junctures along the road, i.e., upon the participant's attainment of the age of age 35 and right before, i.e., within 90 days, beginning to receive benefits under the plan. 

Sadly, the participant spouse must threaten and be willing to divorce unless the spouse goes through with the waiver that he or she gave in a prenuptial agreement, i.e., before the wedding, if the participant spouse encounters any reneging or change of heart down the road. There have been many attempts to provide waivers in prenuptial agreements, but these do not work alone.  Nevertheless, a waiver provision should be part of a prenuptial agreement.

— Read on Great, I'm Divorced. Now What? ThinkAdvisor.