My $1.6 Million Retirement Account Has an Automatic Annuity Clause if I Die: What Are My Options?
A Reddit user in r/ChubbyFIRE discovered what appeared to be an automatic annuity clause in their T. Rowe Price employer-sponsored retirement account worth $1.6 million. The plan documents suggested that upon death, 50% ($800,000) would be converted into a lifetime annuity for the surviving spouse rather than passed as a lump sum. The article explains that this is a Qualified Pre-Retirement Survivor Annuity (QPSA), a federally mandated benefit under ERISA for certain pension-like plans. However, standard 401(k) plans are generally exempt from QPSA requirements. The confusion arose from misreading plan documents. The article provides guidance on waiving QPSA with spousal consent and notarization, and clarifies that most defined contribution plans do not require this annuity feature.
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