Joint and survivor annuity on participant-selected annuities

P/OPINION 75-71

                                                               205


                        December 16, 1975


Dear              :

This is in response to your letter raising questions
concerning the joint and survivor annuity provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).

You ask first if a joint and survivor annuity is required
under a defined contribution plan which provides for a
lump-sum distribution of cash to participants but which
permits the employee to direct the value of his account
be used to purchase an annuity contract from an insurance
company.

The requirements of section 205 of ERISA regarding joint and
survivor benefits for pension plans providing for the payment
of benefits in the form of an annuity is applicable to the
situation you describe; the applicability of those requirements
cannot be made to hinge on the plan's designation of which
is its ordinary form of benefit where no direction is made,
otherwise the joint and survivor provisions could be nullified.
Moreover, section 205(a) requires provision for joint and survivor
annuities in any pension plan providing for the payment of
benefits in the form of an annuity; there is no basis for the
distinction you suggest between defined contribution and
defined benefit plans in this regard. Thus, in the plan
you describe, where the designation is made by the employee
that an annuity be provided, the joint and survivor provisions
apply.

You ask also whether a plan must provide for a joint and survivor
annuity, regardless of the wishes of a surviving spouse, if
the employee dies before retirement but after attaining
early retirement age. Where a pension plan provides for the
payment of benefits in the form of an annuity, during the period
beginning on the later of the date the employee reaches the
earliest retirement age and the first day of the 120th month
beginning before the date on which he reaches normal retirement
age and ending with the date on which he reaches normal retire-
ment age the participant must be accorded a right to elect
a joint and survivor annuity (section 205(c)(1)). The wishes
of the surviving spouse cannot be made relevant since at that
2


P/OPINION 75-71


point in time preceding death the identity of the surviving
spouse is unknown.

As to your concern that the surviving spouse might prefer
an alternative benefit instead of an annuity, the temporary
regulations on joint and survivor annuities issued by the
Internal Revenue Service on October 3, 1975, provide that
a plan will not fail to meet the requirements for tax
qualifications under section 401(a)(11) of the Internal
Revenue Code (which contains joint and survivor annuity
requirements similar to those in section 205, ERISA),
merely because the plan "provides that the spouse
of a deceased participant may elect to have benefits paid
in a form other than a qualified joint and survivor annuity"
(section 11.401(a)-11, 40 Fed. Reg. 45810).

Sincerely,