Qualified pre-retirement survivor annuity (QPSA): What it is and how it works

A qualified pre-retirement survivor annuity (QPSA) can provide important protection in many qualified retirement plans. In these specific plans, it typically ensures that if a vested participant dies prior to retirement benefits starting, their surviving spouse receives a lifetime annuity.

Unlike a qualified joint and survivor annuity (QJSA), which applies after retirement, a QPSA applies before retirement. It can fill the gap between active employment and the start of lifetime annuity payments.

This guide breaks down QPSA meaning, eligibility rules, and situations in which waiving a QPSA might make sense.      

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What is a QPSA?

A QPSA is a mandatory survivor benefit provided to certain retirement plans guaranteed by the Employee Retirement Income Security Act of 1974 (ERISA). It pays a life annuity to a surviving spouse or another beneficiary named under a Qualified Domestic Relations Order (QDRO). The benefit begins after the participant dies and continues for the survivor’s lifetime.

A QPSA is a pre-retirement version of a QJSA. Rather than providing joint and survivor income during retirement, it provides survivor income if death occurs before retirement in these certain plans. This structure makes the QPSA a form of qualified retirement annuity designed to protect spouses before benefits begin.    

QPSA rules typically only apply to defined benefit plans (like traditional pensions), and some defined contribution plans such as money purchase plans. A QPSA isn’t a lump-sum death benefit. It’s a lifetime annuity, designed to give surviving spouses long-term financial security.      

QPSA mechanics and qualification

A QPSA follows strict ERISA mandates that determine who qualifies, how the benefit triggers, and the steps a surviving spouse must take to start receiving payments. Once a participant becomes vested in the retirement plan, the QPSA becomes a protected survivor right unless the couple waives it.  

Who qualifies for a QPSA?

Typically, a surviving spouse qualifies for a QPSA when:

• The participant was vested in the retirement plan.
• The participant died before retirement benefits began.
• The couple had been married for at least one year.
  

If these conditions are met, the surviving spouse can receive the QPSA’s survivor benefit, unless the participant and their spouse sign a waiver to replace the QPSA with an alternate benefit. Non-spouse beneficiaries can also receive the QPSA if a QDRO permits it.

Vested participants who die before retirement

Vesting determines availability of the QPSA. When an employee becomes vested, the plan is obligated to provide the QPSA to the participant’s surviving spouse if the participant dies before benefits begin.

Under ERISA, plans must also provide participants with QPSA notices between the ages of 32 and 35 or within one year if the participant enters the plan at an older age. These notices explain the QPSA retirement benefits, spousal rights, and how to waive a QPSA.

Plans treat the QPSA as the default survivor protection for married participants in qualified retirement plans. To waive it, a participant must select an alternative benefit and the spouse must provide written, notarized consent. Absent this consent, the QPSA remains in place. It’s meant to protect spouses from unfairly or unintentionally losing retirement benefits.  

How are QPSA payments calculated?

Plans calculate QPSA payments using the same actuarial framework used to determine retirement income. The plan starts with the participant’s accrued benefit at the time of death. It then converts that value into a lifetime annuity for the surviving spouse.

The plan uses its own earliest retirement age when performing this calculation. This age reflects the earliest point when the participant could begin receiving benefits. While it can vary by plan, it’s often 55. ERISA requires plans to follow Treasury rules for determining earliest retirement age, based on each plan’s terms.  

Because the participant didn’t live to retirement age, the plan makes actuarial adjustments to convert the accrued value into a lifetime annuity income stream for the surviving spouse. These adjustments reflect life expectancy assumptions for both the participant — as if they had reached the earliest retirement age — and the surviving spouse.

Many plans base the QPSA on the plan’s QJSA survivor percentage — often 50% — but this varies by plan. This results in a life annuity for the surviving spouse, providing regular monthly income. While intended to provide long-term income, ERISA permits plans to cash out very small amounts (present value of less than $7,000) as a lump-sum payment.  

IRS survivor benefits

When a QPSA pays out, the IRS considers the type of retirement plan and how the survivor receives the money. Then, it determines tax treatment. Because most QPSAs come from qualified retirement plans — originally funded with pre-tax dollars — the IRS treats the annuity payments to the surviving spouse as ordinary income. The survivor should include each monthly annuity payout in their taxable income in the year they receive it. The same rules apply to any lump-sum payments.

Should you waive QPSA?

Most couples keep QPSAs in place to guarantee lifetime retirement income for surviving spouses. Sometimes waiving a QPSA makes sense, but the decision can have meaningful consequences.

When a married couple waives the QPSA, they’re selecting to replace the mandated benefit with an alternate retirement benefit, typically a single-life annuity. This type of annuity typically provides a higher monthly payment during the participant’s lifetime but stops completely at their death. This takes away the long-term protection for the spouse.

It comes down to a choice between maximizing income today and ensuring future survivor benefits. If a spouse has another source of retirement income, like from a pension plan or other annuities, waiving a QPSA may make sense. The decision requires careful consideration of longevity risk and household resources.      

Using annuities to strengthen your retirement with Gainbridge

A QPSA protects surviving spouses before retirement begins. However, most people may look for a strategy that guarantees income when retirement starts. Fixed annuities can complement employer-based survivor benefits.

Gainbridge annuities offer guaranteed growth, 100% principal protection, and predictable long-term income. For many couples, pairing fixed annuities with employer-sponsored retirement and pension plans, Social Security, and other savings can help solidify the future. This combination helps couples forecast future income with greater confidence.

Explore Gainbridge today to compare annuities and find the right mix for your financial strategy.

This article is intended for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice. For advice concerning your own situation please contact the appropriate professional. The GainbridgeⓇ digital platform provides informational and educational resources intended only for self-directed purposes. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.

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