Designated Vs. Default Beneficiary

[flosfur]

Under PPA, a non-spouse designated beneficiary, as defined in S401(a)(9)(E), is eligible for direct rollover to an IRA.

Per S401(a)(9)(E), a "designated beneficiary" is any individual designated as a beneficiary by the employee.

A participant died without a surviving spouse and without designating a beneficiary.

Under the plan provisions, default beneciaries are the deceased participant's children.

Are they considered "designated beneficiaries" for Inherited IRA rollover purposes?

I don't think so, because in this case the employee did not designate the beneficiary(ies), but I wanted to confirm my conclusion.

[J Simmons]

I think the children are "designated beneficiaries."

Treas Reg § 1.401(a)(9)-1:

D-1. Q. Must an employee (or the employee's spouse) make an affirmative election specifying a beneficiary for a person to be a designated beneficiary under section 401(a)(9)(E)?

A. No. A person's status as designated beneficiary is not dependent upon being selected by an employee (or by the employee's surviving spouse, in the case of certain distributions under section 401(a)(9)(B)(iv)(II)). Thus, for example, if the terms of the plan specify the beneficiary, then whoever is so specified is the designated beneficiary and is treated for purposes of section 401(a)(9) as having been designated by the employee (or the employee's surviving spouse). The choice of beneficiary is subject to the requirements of sections 401(a)(11), 414(p), and 417.