Jump to content

Beneficiary is also a participant in the same plan


austin3515

Recommended Posts

Can I simply transfer the deceased spouse's account to the surviving spouse's account in the Plan? Would it be a rollover?  Should I separately account for it to ensure the 10% penalty applies.

Perhaps more importantly must the balance leave the Plan within 5 years due to RMD rules (participant was under 70.5 when she died).

Austin Powers, CPA, QPA, ERPA

Link to comment
Share on other sites

Forget the marital relationship and participant status and follow plan terms for dealing with beneficiaries.  The one wrinkle you might face is if the beneficiary (coincidentally the participant) elects to roll over the deceased's account and wants to roll over to the participant's account.  Then also follow plan terms pertaining to rollovers to the plan by participants.

Link to comment
Share on other sites

Depending on the ages of the deceased participant and surviving spouse, there may be reasons to either leave it as an inherited account (exempt from the 10% penalty) or to roll it into an account in the spouse's name.   Unless you have unusual plan language, it should be the spouse's option for which happens.  If the surviving spouse elects to roll over into the same plan, I would do the same distribution paperwork that you would if he elected to roll it elsewhere.

Does the plan apply the 5 year rule to surviving spouses?  If not, the statutory required beginning date should apply.

Link to comment
Share on other sites

What QPhile said. The only way the money can get into the surviving spouse's participant account is if there is an eligible rollover distribution under 402(c) and a (presumably direct) rollover back into the plan. So the plan would obviously also have to accept rollovers. Once in the surviving spouse's participant account the 10% penalty and RMD rules would apply to the rolled over dollars the same way they do to any other dollars in the participant's account.

Link to comment
Share on other sites

Thanks guys!  the  5 year rule does apply in this situation.  The Plan does not allow for rollovers, so it looks like the bene/spouse is just going to have to roll to an IRA.  Thanks!

Good point on the 10% tax - in this case he is over 59.5.

Thanks guys!

Austin Powers, CPA, QPA, ERPA

Link to comment
Share on other sites

  • 2 years later...
On 11/16/2017 at 9:12 AM, Kevin C said:

Depending on the ages of the deceased participant and surviving spouse, there may be reasons to either leave it as an inherited account (exempt from the 10% penalty) or to roll it into an account in the spouse's name.   Unless you have unusual plan language, it should be the spouse's option for which happens.  If the surviving spouse elects to roll over into the same plan, I would do the same distribution paperwork that you would if he elected to roll it elsewhere.

Assuming at the decedent's time of death the deceased is age 78 and the surviving spouse is age 72, and the surviving spouse decides to treat the decedent's account as an inherited account under the plan. How are RMD's calculated in future years for the two separate accounts - does the age difference matter? What are the advantages for keeping it in the Plan rather than rolling it into an IRA? And is it possible to keep it in the plan for more than 10 years?

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...