RMDs

[Nassau]

Participant DOB 1/11/1940, she turns 70.5 on 7/11/2010 and her required beginning date is 4/1/2011, the participant does not want to wait and decides to take her first RMD in 2010 and it is distributed to the participant on 9/30/2010.

The participant dies on 1/27/11 before her required beginning date of 4/1/2011.

Question - Should the 2011 RMD payment be calculated using the life expectancy of the deceased participant's or the beneficiary? Please note that the beneficary is the spouse.

[QNPG]

Participant DOB 1/11/1940, she turns 70.5 on 7/11/2010 and her required beginning date is 4/1/2011, the participant does not want to wait and decides to take her first RMD in 2010 and it is distributed to the participant on 9/30/2010.

The participant dies on 1/27/11 before her required beginning date of 4/1/2011.

Question - Should the 2011 RMD payment be calculated using the life expectancy of the deceased participant's or the beneficiary? Please note that the beneficary is the spouse.

The first post-death minimum distribution calculation is made for the calendar year that begins after the date of the participant’s death. For the year that includes the participant’s death, the minimum distribution is still calculated as if the participant is alive. In my opinion, the RMD for the distribution calendar year 2011 would be calculated using the participant's life expectancy factor because the participant died in 2011.

For 2012, I would follow the rule below:

Reference material: EOB - Chapter 6 - Plan Distributions, Section VII, Part D, Calculating minimum distributions under the Account Balance Method - Section 8.d.:

"Since the designated beneficiary is the participant’s spouse, the Life Expectancy Factor is the greater of: (1) spouse’s remaining single life expectancy, using the spouse’s attained age on his or her birthday falling in the distribution calendar year, or (2) the participant’s remaining single life expectancy, as determined in 8.b.3) below. See §1.401(a)(9)-5, Q&A-5(a)(1) and Q&A-5©(2) and (3), of the 2002 Regulations, and the example in 8.c.1) below. The spouse’s life expectancy factor, as described in (1), will be the controlling factor if the spouse is the same age (i.e., born in the same calendar year) or younger than the participant. The participant’s life expectancy factor, as described in (2), will be the controlling factor if the spouse is older than the participant, but only as long as the participant’s remaining life expectancy calculated in accordance with 8.b.3) below is longer than the spouse’s life expectancy."

[Tom Poje]

based on 1.401(a)(9)-3

Q-1

if you die before the RBD what happens?

A-1

if an employee dies before the employee's RBD (and thus, before distribution are treated as having begun in accordance with 401(a)(9)(A)(ii)...

thus it appears it doesn't matter the fact the person actually took a distribution. that distribution is not treated as having "begun" mim distributions because it was taken before the RBD!!!!

ERISA Outline book also agrees with this conclusion (unless the distribution was an annuity)

the rest of the paragraph in the regs, in particularly Q-3 describes spousal beneficiary.

I'd also take a look and see if the document has particular language. I believe one rule is you can wait until the spouse turns 70 1/2 unless the document has specified otherwise.

thus it appears it doesn't matter the fact the person actually took a distribution. that distribution is not treated as having begun mim distributions.

ERISA Outline book also agrees with this conclusion (unless the distribution was an annuity)

[QNPG]

based on 1.401(a)(9)-3

Q-1

if you die before the RBD what happens?

A-1

if an employee dies before the employee's RBD (and thus, before distribution are treated as having begun in accordance with 401(a)(9)(A)(ii)...

thus it appears it doesn't matter the fact the person actually took a distribution. that distribution is not treated as having "begun" mim distributions because it was taken before the RBD!!!!

ERISA Outline book also agrees with this conclusion (unless the distribution was an annuity)

the rest of the paragraph in the regs, in particularly Q-3 describes spousal beneficiary.

I'd also take a look and see if the document has particular language. I believe one rule is you can wait until the spouse turns 70 1/2 unless the document has specified otherwise.

thus it appears it doesn't matter the fact the person actually took a distribution. that distribution is not treated as having begun mim distributions.

ERISA Outline book also agrees with this conclusion (unless the distribution was an annuity)

Tom, so the fact that the participant actually elected then received the first RMD on 9/30 but before 4/1 - she's still viewed as not taking a distribution before the RBD?

[Tom Poje]

that's my understanding.

see Part F Participants Death before RBD in the ERISA Outline Book of Section VII.

in particular see the example 1c

[QNPG]

that's my understanding.

see Part F Participants Death before RBD in the ERISA Outline Book of Section VII.

in particular see the example 1c

The thing I enjoy most about this industry is that you can learn something NEW every single day!

Thanks, Tom.

[mbozek]

that's my understanding.

see Part F Participants Death before RBD in the ERISA Outline Book of Section VII.

in particular see the example 1c

The thing I enjoy most about this industry is that you can learn something NEW every single day!

Thanks, Tom.

See Reg 1.401(a)(9)-3 Q/A-1 -Receiving first MRD before the RBD (4/1/11) does not change the fact that the retiree died before the MRD. If the retiree dies before the RBD then the remaining distributions are treated under the rules for pre RBD death, i.e, 5 year payout or commence periodic payments within 1 year or spousal rollover. Only exception is if retiree commenced payments under an annuity contract before RBD.