Non-Spouse beneficiary & 401(a)(9)(B)(iii)(III)

[Earl]

A Participant, past his required beginning date, dies. Beneficiary is his sister. She wants to annuitize to make distribution go past 5 years.

Mechanically, how is this done.

Does the plan have to annuitize her?

Can an annuity be purchased?

If so, is the account distributed to the annuity by the Trustee so the Trustee is responsible for selection of the annuity provider?

Since the money cannot be rolled, can 100% be distributed and an annuity then purchased by the beneficiary? (So she is the one selecting it?)

If so, the plan issues a 1099 code 7, then how would the participant get that money excluded from current income?

If the plan annuitzes her can she be charged every year for the calculations (I think maybe)? for the 1099 (I think no)?

(15 years and no one ever wanted an annuity before!)

[mbozek]

Aannuity benefit can be purchased if plan permits an annuity as a benefit option. Otherwise benefits must be distributed under one of the options permitted by the plan. If plan distiabutes a lump sum and beneficary purchases an annuity then bene will be taxed on fmv of lump sum.

[Earl]

thanks....

the plan definately is required to offer annuity. So Trustee has to select and purchase it?

This is a very small biz. the guy that died was the founder of the biz and the Trustee until a yr ago. guy that is taking over the biz will be clueless when I tell him to go get an annuity.

So I guess it means referring him to an ins. agent...

[mbozek]

Plan admin. must follow the terms of the plan which means purchasing an annuity.Only exception is if value of decedents account does not exceed $5,000 then a lump sum can be paid out. Purchasing an annuity is a problem in small businesses -- but this a problem for Congress to fix.