Qualified Pre-Retirement Survivor Annuity (QPSA)
Candlefocus EditorThe U.S. Employee Retirement Income Security Act (ERISA) established rules and regulations for QPSAs. One of these rules states that a qualified plan must offer a QPSA to eligible beneficiaries. This means that the plan document must include language which specifically allows for a QPSA. The amount of the benefit is determined by the plan assets, as well as other factors such as the number of years the deceased employee contributed to the plan.
The QPSA must equal the amount of the employee's retirement benefit that would have been received had the employee lived and reached retirement age. The benefit must also be a steady, recurring payment. Generally, any alternative plan options, such as lump-sum payments or phased payments, are not permissible under the QPSA rules.
When a QPSA is offered, the plan or plan sponsor must also provide a QPSA Notice to the eligible beneficiaries. This notice must state clearly the status of the deceased employee’s retirement plan, and whether it offers a QPSA. The notice must also include information about the spouse’s right to the QPSA, how it will be paid, and any applicable deadlines for making a claim for the benefit.
For non-spouse beneficiaries of a qualified plan, ERISA sets forth different rules for survivor benefit payments. These may include distributions from retirement accounts, such as IRAs, in lump sum or over a defined period. The laws also cover employee stock options and other sources of retirement income.
QPSAs provide important financial security for surviving spouses of employees with qualified retirement plans. By understanding the rules and requirements, survivors can make sure they receive the compensation they are entitled to so they can continue on in life without the financial burden of the deceased’s retirement.