beneficiary and participant

[cpc0506]

Participant A participates in DC plan Z.  Participant A dies. During year end valuation work we learn that her assets in the plan are just transferred to her beneficiary (her spouse) and kept in the plan. But the beneficiary is not an employee of the company sponsoring Plan Z.  We don't believe the Alliance handed the distribution correctly. The funds should have been distributed. Do you agee?  

[QDROphile]

Was there supposed to a distribution?  Was there a sloppy use of the term "transfer" to mean that the plan will now recognize the beneficiary as controlling the benefit, including determination of timing of distribution?

Plan terms will dictate when distributions to beneficiaries must occur.  Do not presume immediate distribution. I venture that it is common allow spouse beneficiaries to maintain the account of the participant subject to the limits of the required distribution rules.

[ESOP Guy]

I agree your use of the term transferred here is vague.  A spouse isn't required to take a distribution under the law for years assuming both were under 70.5.  So if all Alliance did was re-name the account to keep clear the spouse is the owner of the account I am not sure I see the issue.  I guess they could have left it in the deceased's name with a note they are dead and who the beneficiary is.  The net effect is the same  in those two cases. 

The plan might require an earlier payment but I doubt it.  I can't remember seeing a plan that forced a spouse beneficiary out beside the RMDs. 

[QDROphile]

However it is accomplished, it must be remembered that the benefit is the participant's benefit to which the beneficiary is entitled.  It makes a difference and it makes a difference if the beneficiary is the spouse or someone else.