RMD Rules

[Guest lvegas]

DC/401(k) Plan has rule that if p dies and there is no spouse, then remaining account balance must be paid to designated beneficiary ASAP as a lump sum. The plan text does not specify for purposes of RMDs whether the 5-yr or lifetime payout rule applies b/c it is moot.

Plan wants to permit nonspouse rollovers under PPA/N 2007-7. The inherited IRA rules generally state that the RMD rules of the plan govern the recipient IRA. The RMD regs (1.401(a)(9)-3, Q&A-4) state that if a plan does not states which rule (ie, 5 yr or lifetime) applies, then lifetime is the default.

Could the plan be said to have implicitly chosen the 5-yr rule based on its ASAP lump sum requirement or does the default kick in?

[Bird]

I don't have a straight answer, but here are my thoughts-

First, the plan may have an RMD amendment that supersedes the plan language saying "lump sum only." That is, there are a lot of plans saying "lump sum" at death, but then when you read the final RMD amendment, it has language permitting lifetime distributions.

Second, even if you can't find relief as above, I think you can use N 2007-7, Q&A 17©(2), which references the cite you mentioned in the final regs and says you can use the lifetime method, as long as the distribution is made in the year following death.

Bottom line: I don't think the 5-year rule is implicit just because the plan says "lump sum."