rmd for dead owner

[abanky]

The owner was taking his rmd in the form of a 100% J&S in 2009.

In October of 2009, he terminated his employment and elected to take a lump sum distribution. He had already taken out his 2009 RMD. Unfortunately, the plan was unable to pay him out because of the 1.401(a)-5(b)(3) restriction.

In November of 2009, he passed.

For 2010, the plan now has enough assets that no restrictions are in place. What are the plan's options?

[David MacLennan]

Who are the beneficiaries?

[abanky]

The spouse.

[David MacLennan]

Here is my understanding of the options:

1) The death benefit can be rolled over to the surviving spouse's IRA. There would be no RMD from the plan in 2010. She would commence her RMD's from the IRA when she reaches age 70.5. If she has already reached 70.5 or over in 2010, she would commence RMD's from the IRA in 2011 (no RMD from the IRA in 2010). The rollover can also be to another plan or distributed to the same plan (if to the same plan, I recommend you "proof" the rollover by making some transaction).

2) Commence RMD's from the plan to the spouse under the "life expectancy rule" by Dec 31 2010.

3) Distribute the entire death benefit from the plan to the spouse by Dec 31 2014 under the "5-yr rule."

As always, check plan document provisions for what is allowed.

#1 is probably the best option for most people, especially where the spouse is younger.

I recommend you tell the client not to rely on your opinion of the options since the rules are complex. Why take the responsibility? If they don't want legal advice, then that is THEIR choice.

[abanky]

Thank you so very much.

[abanky]

Anyone know any code section that would verify Don's option 1? I'm trying to find something to verify this option.