Distribution to Bene's

[Guest Twinky]

I have read and re-read everything I can find on the topic, but I am still confused. Please help!

The Participant was receiving RMD's when he passed away. He was not married.

Is there a time frame as to when the monies have to be distributed to the beneficiaries?

Thank you so much for your input!

[Bird]

RMDs are based on the greater of the bene's life expectancy, or the participant's life expectancy in the year of death. These are adjusted by subtracting 1 each year. First RMD is due by 12/31 of the year following death.

But...plan provisions may require a lump sum, so you have to read the document.

1.401(a)(9)-5 (DC plans):

________________________________________________________________________________

__

Q-5. Pension For required minimum distributions after an employee's death, what is the applicable distribution period?

A-5. (a) Death on or after the employee's required beginning date. If an employee dies after distribution has begun as determined under A-6 of §1.401(a)(9)-2 (generally on or after the employee's required beginning date), in order to satisfy section 401(a)(9)(B)(i), the applicable distribution period for distribution calendar years after the distribution calendar year containing the employee's date of death is either—

(1) If the employee has a designated beneficiary as of the date determined under A-4 of §1.401(a)(9)-4, the longer of—

(i) The remaining life expectancy of the employee's designated beneficiary determined in accordance with paragraph ©(1) or (2) of this A-5; and

(ii) The remaining life expectancy of the employee determined in accordance with paragraph ©(3) of this A-5; or

(2) If the employee does not have a designated beneficiary as of the date determined under A-4 of §1.401(a)(9)-4, the remaining life expectancy of the employee determined in accordance with paragraph ©(3) of this A-5.

[Guest Twinky]

Thanks for the help!

If they do offer lump sum, annities, installments, etc....

When does the beneficiary have to decide on what type of distribution they want? And when does the Participant's money HAVE to be distributed? Is there a time frame?

[Leopurrd]

If I remember correctly, the 5 year rule does NOT apply when RMD's have commenced. You would have to ensure that the distributions occur at least as quickly as they would have had the participant not passed on (or put another way, at least as fast as the deceased's RMD).

[Guest Twinky]

Thanks so much!

I didn't think the 5 year rule applied. So, technically, they have to do SOMETHING by 12/31 (since that would be at least as rapidly)?

[Bird]

The time frame is that the first beneficiary RMD must be taken by 12/31 of the year following the year of death, the second by the next 12/31, etc.

[Guest Twinky]

Thanks everyone!

Let's assume they don't want to continue to receive the RMDs.

This is where my confusion comes in...The wording "at least as rapidly...."

The most rapid method of course would be a lump sum. Does that mean they would have to take the lump sum?

If they want a lump sum, installments or annuities, do they have a time frame to make that decision?

I'm sorry to be a pain.

[jevd]

See Bird's responses. They may always take more. They just MUST take the minimum. That satisfies the "at least as rapidly rule" Starting next year they could transfer (direct rollover) to an inherited IRA in the name of the deceased for their benefit. They stilll must take the minimum however and they may not make any other contributions to the account.

[Guest Twinky]

Thank you Bird for your expertise. I guess I thought you were referring to RMD's only. I apologize.

Thank you jevd for explaining it in a way that is easily understood.

And thank you Leopurrd.