Distribution to Beneficiary of Non-Spouse Beneficiary

[Guest wayneiser]

Unmarried participant names Son (B) as beneficiary.

Participant dies when B is age 50.

B elects payments over his lifetime (i.e., 34.2 years).

B receives minimum distribution each year (i.e., 1/34.2; 1/33.2; 1/32.2, etc.).

B dies in 2004 after receiving the third distribution (1/32.2).

What is the minimum distribution in 2005 for C, who is B’s beneficiary?

Is it?

a) 1/31.2? If yes, will minimum distributions then continue based on B’s life expectancy (i.e., 1/30.2; 1/29.2, etc.) until all assets have been distributed?

b) 100% of the account balance payable in the year after B’s death (2005)?

c) 100% payable within 5 years of B’s death, which can be taken in any manner as long as all of the assets have been distributed from the account before December 31, 2009?

[jevd]

It is A.

A beneficiary naming a beneficiary does not change the required distribution period which is established at the death of the original account owner.

The marketing term "Stretch IRA" sometimes gives a misconception that life expectancies are extended. ( not part of your question I know)

[FundeK]

I am full of questions today! I have a similar situation as that of the original poster.

Jevd stated that the answer was A. My questions are: Does this have to be allowed in the plan, or is this a "given"? And does anyone have a cite or reference?

Thanks much!

[jevd]

This is the minimum amount as stated in the 401(a)(9) regulations. The regulations do not allow for a change in the distribution period when a beneficiary names a beneficiary. As far as plan language is concerned, if the plan doesn't allow for the next beneficiary to continue the payout, then the options must be at least as rapidly. Lump sum etc as long as each years distribution meets the original minimum.