Spousal Rights in Private Retirement Plans

Background

Current law provides rights to spouses of retirement plan participants. Protections are stronger in defined benefit (DB) plans than in defined contribution (DC) plans. Since passage of the Retirement Equity Act (REA) of 1984, beneficiaries of DB plans must obtain written spousal consent to take payment in a form other than a joint-and-survivor annuity. 

Such protection for spouses is unavailable in individual retirement accounts (IRAs) and rare in DC plans. Thus, employees can withdraw and use 401(k) and IRA assets without spousal consent. This is a serious shortcoming. However, when designating who should be the beneficiary in the case of death, DC participants cannot specify a beneficiary other than the spouse. 

The REA and the Pension Protection Act of 2006 improved spousal rights in cases of widowhood or divorce. For example, they made it easier for divorced spouses to qualify for spousal benefits. They also required employers to give workers more options for structuring joint-and-survivor annuities. However, these reforms have not eliminated all inequities. 

 

SPOUSAL RIGHTS IN PRIVATE RETIREMENT PLANS: POLICY

SPOUSAL RIGHTS IN PRIVATE RETIREMENT PLANS: POLICY

Protecting spouses

Defined contribution plan account holders should have to obtain written spousal consent to take payment from the account in a form other than a joint-and-survivor annuity. Similar spousal protections also should be enacted for individual retirement accounts (IRAs) funded by rollovers or other transfers of plan distributions. 

Spousal rights for all defined benefit plans in cases of widowhood or divorce under the Retirement Equity Act of 1984 and the Pension Protection Act of 2006 should be further enhanced.