RMD for recently deceased & 1099-R/1-person plan

[TPApril]

Owner of 1-person plan just died, shortly prior to end of year and prior to taking his RMD.

Trustee is unable to be legally appointed prior to eoy.

I'm pretty sure since the plan requires RMD's, that an authorization signature is not required. The recordkeeper is insisting it is.

Additionally, since the RMD is formally taken out after date of death, I'm thinking the 1099-R is still treated as RMD, but perhaps should be marked as Death, even though this is not a Death distribution?

[Peter Gulia]

That the recordkeeper says a signature is needed does not necessarily mean the recordkeeper says the plan requires that signature. Rather, it might be about something the recordkeeper or a custodian requires under either’s service agreement.

A custodian might have no authority to decide whether the plan requires or permits a distribution. A custodianship for a retirement plan is nondiscretionary, with all payments instructed.

If the decedent is the only human who had authority to act for the plan’s administrator/trustee, instructing a distribution might have to wait until there is someone with authority to act for the plan’s administrator/trustee.

[Lou S.]

I'm not aware of any provision to waive the RMD in year of death (I'm assuming participant is past RBD).

If you have beneficiaries you would pay it to the beneficiaries and code it as a death benefit and let them know it is not eligible for rollover.

But as a practical matter determining these things and getting them accomplished before 12/31 can tricky from a practical standpoint. Especially getting a custodian or reckord keeper to act when they don't have another authorized agent on file.

This does seem to be a case where there IRS would likely waive the 50% excise tax for reasonable cause assuming the RMDs are made as soon as practicable but from a plan standpoint I think you might be looking at EPCRS for a waiver of failure to satisfy 401(a)(9). I can't recall if that falls under VCP or something you can self correct.

And while I know this is not correct I believe one time we did make a payment to the participant after death when he died late in the year and the heirs deposited it into his bank account post mortem but I think the check was issued a few days before his death but arrived shortly after he passed the 1099-R was issue to the participant in that case.

 

 

 

[TPApril]

So ultimately, Edward Jones back office is refusing to allow the RMD payment to be issued by 12/31.

I would note this is not the first RMD for this now deceased participant.

[Appleby]

On 12/6/2022 at 3:35 PM, TPApril said:

I'm pretty sure since the plan requires RMD's, that an authorization signature is not required. The recordkeeper is insisting it is.

What about the withholding election?

On 12/6/2022 at 3:35 PM, TPApril said:

Additionally, since the RMD is formally taken out after date of death, I'm thinking the 1099-R is still treated as RMD, but perhaps should be marked as Death, even though this is not a Death distribution?

It would be a death distribution, because it is made to the beneficiary and reported under the beneficiary's TIN