Domestic Partner Benefits: Pension Survivor Annuities

Filed under: Workplace

The following is a brief explanation of a qualified joint and survivor annuity (QJSA), a qualified pre-retirement survivor annuity (QPSA) and the ways in which these benefit distribution forms impact or are otherwise important for same-sex domestic partners (and same-sex couples married under the laws of the State of Massachusetts).

The information in this document does not constitute legal advice. For assistance with legal questions specific to your situation, please consult an attorney.

As a general matter, the employee retirement income security act (ERISA) mandates that qualified defined benefit plans make benefits payable in certain distribution forms. The default benefit distribution form under ERISA for a single or non-married individual is a single life annuity. In contrast, when a participant is married, ERISA mandates that the default benefit distribution form be a QJSA/QPSA, which guarantees the spouse of the employee a benefit in the event of the employee’s death. Note: employees are already free to elect the beneficiaries of their choice for a defined contribution plan such as a 401(k).

In part because of the Defense of Marriage Act (DOMA), which provides a federal definition of "spouse" that is limited to a person of the opposite sex, plans are not required to provide a QJSA or QPSA to a participant with a same-sex domestic partner or spouse. Plan sponsors (i.e.: employers that provide defined benefit plans) are nonetheless free to provide such benefit payment forms specifically for same-sex couples.

Single Life Annuity

A single life annuity is a form of distribution that typically pays benefits to a plan participant in substantially equal periodic payments over the life of the participant.

Qualified Joint and Survivor Annuity

A QJSA is defined under the Internal Revenue Code ("Code") and ERISA to be a single life annuity payable to the married participant at retirement with a survivor annuity for the life of the participant’s opposite-sex spouse. The big difference between a single-life annuity and a QJSA is the survivor annuity component of the QJSA (i.e., the right of a surviving spouse to receive an annuity for the duration of his or her life following the participant spouse's death). Under ERISA and the Code, the amount of the survivor annuity may not be less than 50%, and no more than 100%, of the amount of the annuity payable during the time that the participant and spouse are both living.

The equity issue here is not the total amount of the benefit, but rather the right of a participant to elect survivor benefits for his or her surviving same-sex partner or spouse. In most instances, the total amount of the QJSA is adjusted so that the present value of the benefits payable under the QJSA (including the survivor annuity component) is actuarially equivalent to the present value of the benefits available under the single life annuity. Unless a plan sponsor elects to provide such a QJSA (i.e., a domestic partner QJSA) under the plan’s terms, same-sex couples are denied a valuable survivor benefit otherwise available to their opposite-sex married counterparts.

Qualified Pre-retirement Survivor Annuity

A QPSA is defined under ERISA and the Code as an annuity for the life of the surviving spouse of a participant who dies before the annuity starting date under the plan (i.e., retirement). A QPSA is essentially an ERISA-mandated death benefit payable to a participant's surviving spouse.

This equity issue centers around the fact that ERISA mandates death benefit for an opposite-sex surviving spouse if the participant dies prior to retirement, but not for a surviving same-sex domestic partner or spouse. Unless a plan sponsor elects to provide such a QPSA (i.e., a domestic partner QPSA) under the terms of the plan, same-sex couples will be denied a valuable death benefit otherwise available to their opposite-sex married counterparts.