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This is a good question. We know that the Lump Sum (for NUA) purposes is: 1) a payment within one taxable year of the employee's entire vested accrued benefit; 2) on account of death, age 59 1/2, severance from employment, or disability. We also know that for these purposes, all like-kind plans of the employer are treated as one plan. Your question centers on a determination as to whether the additional "life-time" RMD being paid to the participant's surviving spouse in the year of death (2013) is a payment on the account of death. I would argue that it is not. It is a payment that was already being made, but is now merely being distributed to a different person. The subsquent payments (above and beyond the required amount) would be amounts distributed on the account of death. This interpretation may be a little aggressive. But, in order to qualify as a lump sum, the payment must be made on the account of one of the aformentioned reasons. The RMD in this case was already set to be made (on account of age 70 1/2). The only question was who was going to receive it. Now, any additional amounts would be made to the spouse on the account of death. Once you look at it, the interpretation really doesn't appear to be that aggressive. I'm not sure if there are any Regulations that has ever addressed this particular scenario. Good Luck.

They may want to be asked how they explain their position from the 80/120 rule posted in the 5500 instructions because no one else seems to be interpreting the rule their way.