1.401(a)-20 Q&A 10© addresses annuity starting date for disability benefits:

1. Annuity starting date occurs when payment of disability benefit begins, unless disability benefit is an auxiliary benefit.

2. Disability benefit is auxiliary benefit if upon early or normal retirement age participant receives benefit that satisfies accrual and vesting rules of 411 without taking into account prior payment of disability benefit.

Reg gives two examples based on age 45 participant who is entiled to a vested accrued benefit of $100 per month commencing at age 65 in the form of a qjsa and receives a disability benefit before age 65:

1. If disability benefit does not reduce participant's $100 retirement benefit beginning at age 65, disability benefit benefit is auxiliary benefit, and annuity starting date occurs at age 65.

2. If participant's benefit at age 65 is reduced to $99 at age 65, disability benefit would not be an auxiliary benefit because the $99 benefit at age 65 would not satisfy 411 accrual and vesting rules without taking disability benefit payments before age 65. Thus, annuity starting date occurs when disability benefit is paid.

I recently took over a db plan that provides a disability benefit that is equal to the accrued benefit unreduced for payment before age 65. The plan provides a qjsa election at disability using disability actuarial factors (that results in a more severe reduction than the normal qjsa factors).

A question has been rasied whether this db plan is required to provide the J&S election at age 65 under the above reg. The plan prefers to give the qjsa election at disability.

I am not sure of the answer. You would think I could figure this out some 16 years after the issuance of the IRS regs.

As I see it, I could avoid the whole question by simply having the plan apply a small reduction for early payment upon disability. However, before doing so, I was wondering if anyone had any thoughts on whether:

1. if payment of an auxiliary disability benefit must be disregarded under the regs in determining the annuity starting date; and

2. if offering a qjsa election at disability and imposing a disability qjsa reduction by itself would take the disability benefit out of auxiliary disability benefit status.