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Distributions to Beneficiaries


Guest 457 Plan Consultant
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Guest 457 Plan Consultant

Where the participant dies before distributions are treated as having begun, can the beneficiary (spousal or non-spousal) avail himself of the optional 5-year rule instead of commencing distribution no later than the end of the year following death???

The 457 Answer Book (1999), Q 2:210, states "a beneficiary may irrevocable elect to pay deferrals over the life or life expectancy of the beneficiary (or any shorter period) if the beneficiary is the surviving spouse or over a period not in excess of 15 years if the beneficiary is not the participant's spouse. Such distributions must commence no later than the end of the year following the year of death or, if the surviving spouse is the beneficiary, on or before the end of the year in which the decedent would have attained age 70 1/2." There is no mention of the applicability of the 5-year rule???

If the optional 5-year rule is available for 457 plans...

In the newly proposed 401(a)(9) regulations, in order to take advantage of the optional provision, qualified plans must adopt a provision to use the 5-year rule. In the absence of a plan provision, the life expectancy rule applies in all cases where there is a designated beneficiary. However, there is no guidance (under the old or new regs) with respect to whether or not a 457 plan must state that a participant may avail himself of the 5-year rule.

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