RMD to Active Participant and Designated Beneficiary

[Guest Grumpy455]

X is 73 and has always owned 50% of the business. X's late husband, Y, died at 72 and then owned 50% of the business. Until Y's death, Y was receiving his annual MINDI. X still receives her annual MINDI. X is the sole beneficiary of Y's account balance in the plan. The plan is a DC plan.

For 2005, it seems to me that X will get a MINDI from her account as an active participant using the distribution period from the uniform table--which is 24.7--(she has not remarried) and X will also get a MINDI from the account of her late husband using the distribution period from the single life table--which is 14.8-- (since she is the designated beneficiary of these funds). Does anyone think this approach is inconsistent with the law?

X's personal attorney claims that upon her late husband's death his account "merged" into her account and now the entire kit-and-kaboodle can be distributed using the distribution period from the uniform table--which is 24.7 years for a 73 year old.

Any thoughts? Is there an exception to the rules that I missed? Thanks!

[mbozek]

Why cant the surviving spouse roll over Y's account balance to her own IRA in 2005 and take mrds based upon her life expectancy beginning 2006? My understanding is that spousal rollovers after 70 1/2 are permitted by IRS in PLRs.

[Guest Grumpy455]

Your idea is a good one and would accomplish the same thing, although that is not what X wants to do. The point I was trying to get at in a sort of round about way is whether the plan can simply allocate the inherited benefit to X's account balance under the plan, as if X made a rollover of Y's account balance from the plan to the plan (I know that sounds odd)? X's lawyer says "yes", but I cannot locate any guidance on this issue. Put differently, are there any good legal reasons why the plan under which X inherited Y's benefits cannot also serve as the recipient plan of a rollover of those funds when X also participates in the same plan?

[mbozek]

There have been previous discussions on whether a spouse who partcipaties in the same plan must remove the deceased participants benefits from the plan before placing them in her account because the statute implies that the transfer of the funds to the spouse must be from outside the plan.