RMD for Spouse Sole Beneficiary

[GMK]

For the specific case of a spouse who is the sole beneficiary,

if the participant died prior to the participant's RBD,

for beneficiary distributions from a qualified plan,

does the spouse beneficiary have the option to use the longer of the life expectancies of the beneficiary and participant?

These articles seem to say the spouse beneficiary has that option:

http://www.mhco.com/BreakingNews/ABene_Spouse_041014.html

http://www.mhco.com/BreakingNews/A_SpouseBenef_011008.html

but I have generally read that that option is available when the participant dies on or after (not prior to) the RBD. But maybe the spouse who is the sole beneficiary gets this option no matter when the participant died.

And is this different for IRA's and qualified plans?

Thanks for any clarification.

[Lou S.]

If the participant died prior to the RBD and the spouse is younger, they can roll it to an IRA and treat it as their own as opposed to non-spouse beneficiary that must treat it as an inherited IRA.

That is they can delay distributions until they actually reach as 70 1/2 and must beginning RMDs.

That is to say, spousal beneficiaries generally have some options not available to non-spouse beneficiaries.

[GMK]

I agree entirely, Lou S., but the question is whether the spouse who is the sole beneficiary has the option to take distributions from the qualified plan based on the deceased participant's (longer) life expectancy if the participant died before the RBD.

This option of using the deceased participant's life expectancy when it is longer than the beneficiary's life expectancy is available when the participant dies on or after the RBD (for both spouses and non-spouses), but is it also available to a spouse who is the sole beneficiary in the "before RBD" case?

[GMK]

the question is whether the spouse who is the sole beneficiary has the option to take distributions from the qualified plan based on the deceased participant's (longer) life expectancy if the participant died before the RBD.

Is this an option that can be written into a Plan Document? Is it required to be in the Plan Document?

[Tom Poje]

I believe the answer is 'yes' to the document issue. my power presentation notes from 2010 have the following for death before RBD:

5 year rule: Benefit must be completely distributed within 5 years of the death. IRC § 401(a)(9)(B)(ii), Treas Reg § 1.401 (a)(9)-3, Q&A-2 The ‘5 years’ extends to the end of the calendar year (December 31)
e.g. EE dies January 1, 2003.
5 years is January 1, 2008, extended to December 31, 2008.
Does not matter who the beneficiary is.
If no beneficiary specified, and document does not contain a provision, must use this method Treas Reg. § 1.401 (a)(9)-3, Q&A-4(a)(2)
Or see Publication 575

Life Expectancy Rule:
Makes a difference if beneficiary is spouse!
Non-spouse: must start receiving payments by December 31 of the calendar year following the calendar year the participant died. IRC § 401(a)(9)(B)(iii), Treas Reg § 1.401 (a)(9)-3 Q&A3(a)
Spousal exception: 12/31 of year participant would have turned age 70 ½ (or, if later, must start receiving payments by December 31 of the calendar year following the calendar year the participant died).
If beneficiary specified, and document does not contain a provision, must use this method Treas Reg § 1.401 (a)(9)-3, Q&A-4(a)(1)

[GMK]

My notes are the same, Tom, but the question is not when payments start, but whose life expectancy to use to determine the payment amounts.

My notes and references like pages 18 and 22 of this:

http://www.irs.gov/pub/irs-tege/epchd603.pdf

say that if the spouse is the sole beneficiary, "the distribution period is based on the spouse's life expectancy" if the participant dies before the RBD and with no mention of the participant's life expectancy (page 18), but if the participant dies on or after the RBD, the longer of the spouse's and participant's life expectancy is used (page 22).

Is there a cite or other references that confirm that the spouse can use the participant's life expectancy (if longer) when the participant dies before the RBD?

[Tom Poje]

I don't recall anything other than using the spouse's life expectancy, but that isn't exactly my area of expertise (if I have any !)

[GMK]

Thanks for your replies, Tom.

This is the last (I hope) unknown in my notes on RMD's for beneficiaries.

It's like M-H got the before and after RBD cases reversed in the articles, which seems highly unlikely.

I don't find any option to use the participant's life expectancy in the before-RBD case in our plan documents, so I will stick with using only the spouse's life expectancy if anyone asks.

Until someone posts a cite or explanation (or I find one), the mystery lives on.

[GMK]

Anyone out there have a contact at McKay Hochman who could give a cite or reference?

I wrote to M-H, but heartbreakingly, got no reply.

[Belgarath]

GMK, I agree with you - I see no basis for using other than the surviving spouse life expectancy once the RBD is reached. See 1.401(a)(9)-5, Q&A-5, ©(2).

I expect M-H will get back to you. A year or so ago I found an error in one of their blurbs, wrote to them, and they promptly acknowledged it.

[GMK]

Thanks, Belgarath.

Did you mean to say "before the RBD is reached" instead of "once the RBD is reached"?

Since it's been 3+ months since my e-mail to M-H, I doubt I'll hear from them. Perhaps they would look into it if the message came from someone more esteemed, such as, yourself maybe.

[Belgarath]

Hi GMK - no, I meant to say once the RBD is reached. Why would a life expectancy for RMD purposes even be considered if the RBD has not yet been reached, since there is no RMD until the RBD? Maybe I'm misunderstanding your question?

So employee dies prior to RBD (employee's RBD). Spouse is sole bene and is entitled to use an RBD that is the later of December 31 of the following calendar year, or December 31 of the calendar year the employee WOULD have attained age 70-1/2.

Once that RBD is reached, then the spouse life expectancy is used to calculate the RMD, not the life expectancy of the deceased. At least, that's how I understand the regs.

[GMK]

I think we're using different words to describe the same thing. I see that your 'once the RBD is reached' refers to the RBD that applies to the spouse beneficiary after the employee dies, not the employee's as-yet-undetermined RBD.

Bottom line is that when the employee dies before the employee's RBD, no one, not even a sole beneficiary spouse, has the option to base the distribution period on the employee's life expectancy. (This option is only available if the employee dies after the employee's RBD.)

[TPApril]

I can't say I follow this.

Situation in question:

Participant dies at 64.

Spouse is beneficiary.

Participant would have reached RMD age 72 this year.

Is factor based on surviving spouse age this year?