Plan Sponsors Ask: Spousal Consent Rules

Q: As the person in charge of administering our company’s 401(k) plan, I handle beneficiary changes and distribution requests for our employees. Why is an employee required to have his or her spouse consent when requesting a change of beneficiary or a distribution? The rules are confusing and difficult to explain.

A: Generally, defined benefit or defined contribution plans require plan participants to obtain a written waiver, signed and notarized by their spouse, in two circumstances: (1) to change the beneficiary or (2) to take a withdrawal from their account. The rules for spousal consent originated in the Retirement Equity Act of 1984, which amended ERISA. The act protected benefits for spouses by preventing an account owner from making critical decisions without the spouse’s knowledge. Here’s why: a spouse of a plan participant has an automatic legal interest in that account owner’s retirement plan assets.

If the account owner wishes to appoint someone other than his or her spouse as the beneficiary, the spouse must agree in writing to forfeit his or her interest via a spousal consent waiver that is signed and notarized. Similarly, certain retirement plans include a qualified joint and survivor annuity. This feature provides a plan participant with a lifetime annuity; it also provides a survivor annuity for the participant’s spouse if the spouse outlives the plan participant. The participant can waive this type of benefit with spousal consent. Remember, when in doubt, always follow the terms of your plan’s document, and consult with your service provider such as a third-party administrator or recordkeeper.