death of beneficiary

[Jennifer D.]

I'm sure this question has come up before but I can't find it. We have a participant who was unmarried pass away and name her mother as beneficiary, and her sister as contingent beneficiary. The mother died after the participant, but not before the deathh benefit of the participant was distributed. Does the benefit go to the mother or the sister as contingent beneficary.

My thought is this passes like any other inherritence. The mother was the rightful beneficiary and at the date of her death, the participant's account was among her assets even though it hadn't been distributed. Therefore, it should pass to the mother's estate and no longer be beholden to the beneficiary form.

Any thoughts or cites?

[401king]

I dont' know the answer, but I've referred to 1.401(a)(9)-4 for most beneficiary questions.

[Bird]

My thought is this passes like any other inherritence. The mother was the rightful beneficiary and at the date of her death, the participant's account was among her assets even though it hadn't been distributed. Therefore, it should pass to the mother's estate and no longer be beholden to the beneficiary form.

I believe that is correct.

[jpod]

401(a)(9) regulations are not relevant for purposes of determining who is entitled to receive the money. As to that issue, what does the Plan say? If the Plan says that the contingent beneficiary gets the money only if the primary beneficiary did not survive the participant, then the primary beneficiary's estate gets the money. If the Plan says that the contingent beneficiary gets any money left over after the primary beneficiary dies (or words to that effect), then the contingent beneficiary gets what's left. The former is likely and the latter is unlikely, but it's possible. You certainly don't want to pay it to the wrong person(s).

[401king]

401(a)(9) regulations are not relevant for purposes of determining who is entitled to receive the money. As to that issue, what does the Plan say? If the Plan says that the contingent beneficiary gets the money only if the primary beneficiary did not survive the participant, then the primary beneficiary's estate gets the money. If the Plan says that the contingent beneficiary gets any money left over after the primary beneficiary dies (or words to that effect), then the contingent beneficiary gets what's left. The former is likely and the latter is unlikely, but it's possible. You certainly don't want to pay it to the wrong person(s).

Under section 1.401(a)(9)-4, Q & A 4, the designated beneficiary must be a beneficiary on the date of the death of the employee and remain a beneficiary as of September 30th of the calendar year immediately following the calendar year of the employee’s death.

I take that as saying that if the primary beneficiary isn't alive on 9/30 of the following year, then the contingents become the primaries.

[masteff]

401(a)(9) regulations are not relevant for purposes of determining who is entitled to receive the money. As to that issue, what does the Plan say? If the Plan says that the contingent beneficiary gets the money only if the primary beneficiary did not survive the participant, then the primary beneficiary's estate gets the money. If the Plan says that the contingent beneficiary gets any money left over after the primary beneficiary dies (or words to that effect), then the contingent beneficiary gets what's left. The former is likely and the latter is unlikely, but it's possible. You certainly don't want to pay it to the wrong person(s).

Under section 1.401(a)(9)-4, Q & A 4, the designated beneficiary must be a beneficiary on the date of the death of the employee and remain a beneficiary as of September 30th of the calendar year immediately following the calendar year of the employee’s death.

I take that as saying that if the primary beneficiary isn't alive on 9/30 of the following year, then the contingents become the primaries.

1) You're overlooking subparagraph © of that Q&A-4.

2) That Q&A has to do with the specially defined term "designated beneficiary". It is possible under Q&A-3 of that same section to have no "designated beneficiary". A "designated beneficiary" is defined for purposes of 401(a)(9) (see Code 401(a)(9)(E)), not for purposes of plan inheritance.

3) As asked above, what does the plan say? If it doesn't provide for a delay after death in determining the beneficiary (such as no later than Sept of the following year or at the time the beneficiary's interest is moved to a separate account or distributed), then I don't see how you could delay.

Edit: Just noticed that (c ) of that Q&A-4 says in part "without regard to the identity of the successor beneficiary who is entitled to distributions as the beneficiary of the deceased beneficiary". Which clearly indicates the Service did not intend that determination of the heir/beneficiary is delayed with the determination of the "designated beneficary".

[jpod]

I guess Masteff is agreeing with me; thanks. However, no paragraph of the 401(a)(9) regulations is needed to confirm the fundamental principal that those regulations don't have a say in determining who gets the money, they only control how fast the money must be distributed for tax-qualification purposes and to avoid an excise tax.

[masteff]

Yes, I agree w/ all of jpod's post in this thread. And see the edit I added a couple minutes ago to my post above (I was trying to avoid double posting so added it there before seeing the newest post above).