MMC Benefits Handbook
Contingent Annuity
The contingent annuity form of payment provides you with a monthly benefit payment for your life and when you die, it will provide a monthly benefit payment for the life of a designated survivor, if that person is still living at your death.
When you elect to commence your monthly benefit payment, you select both the designated survivor and the specific percentage of your monthly benefit amount (50%, 66-2/3%, 75% or 100%) to be paid to your designated survivor. When you die, your designated survivor, if then living, will receive the percentage of your monthly benefit you selected for the remainder of his or her life.
If you elect this payment form, a reduction factor will be applied to your monthly benefit to take into account the payments will be made over the course of two lives—yours and in the event of your death, your designated survivor's if he or she is still living at your death. Once your monthly payments begin, you cannot change the percentage you elected for your designated survivor, nor can you change your designated survivor even if he or she dies before you. If your designated survivor is not living at the time of your death, monthly benefit payments will stop.
However, if your designated survivor dies after your completed election is accepted by the Plan but before your elected Benefit Commencement Date, your election is cancelled and you may make a new payment election. If you do not make a new payment election, you will receive the normal form of payment based on your marital status on your Benefit Commencement Date.
If you have a Spouse, your Spouse is automatically your designated survivor. If you wish to elect a Contingent Annuity with a designated survivor other than your Spouse, you must obtain your Spouse's notarized consent to waive his or her rights to the 50% contingent annuity benefit.
If you have a Domestic Partner and you wish to elect a Contingent Annuity with a designated survivor other than your Domestic Partner, you are not required to obtain your Domestic Partner's consent.
The following table approximates some common contingent annuity reduction factors (i.e., the reduction factor applied to the single life annuity payment form to account for the longer period over which your benefit may be paid if you select a contingent annuity form of payment). The exact reduction factor applied to your benefit depends on:
- the benefit percentage you elect for your designated survivor,
- your age on your Benefit Commencement Date, and
- your designated survivor's age on your Benefit Commencement Date.
The amount of your reduced monthly payments depends on the benefit percentage you choose for your designated survivor, the age difference between you and your designated survivor, and your age at your Benefit Commencement Date.
Contingent Annuity Example
Sally retires with a vested Accrued Benefit of $1,000 per month and elects to commence her monthly benefit payments at age 65. Sally has a Spouse, or Domestic Partner, Jordan who is also age 65 when Sally elects to commence her monthly benefit payments. Sally selects a 50% Contingent Annuity form of payment and names Jordan as her designated survivor. In this case, Sally's monthly benefit payment will be reduced to $913 ($1,000 × 91.3%) and paid for the rest of her life. If Sally dies before Jordan, a monthly benefit payment of $456.50 ($913 × 50%) will be made to Jordan for the remainder of Jordan's life.
Naming or Changing Your Designated Survivor
Your selection of a designated survivor is subject to the following restrictions:
- If you have a Spouse and wish to name someone other than your Spouse as your designated survivor, your Spouse must consent. Your Spouse's consent must be in writing, witnessed by a notary public and be made within 90 days prior to your Benefit Commencement Date.
- If you name a designated survivor who is not your Spouse, the percentage of your benefit that is paid to your designated survivor may be limited by law based on your age and the age of your designated survivor on your Benefit Commencement Date. You will be notified if these limits affect your choice of a survivor percentage and beneficiary.