Death before RBD - Multiple Beneficiaries with Different Distributions

[Phlyers]

Participant was a non-owner, born 5/6/47, still working when he died on 1/27/18.  ERISA outline books seem to treat the situation as death before the RBD.

 

Participant had no prior distributions; especially no annuities, so still a death before RBD.  ERISA books and plan document requires either the 5-yr. rule or life expectancy rule be satisfied.  

 

The two beneficiaries are non-spouses.  One is electing to take their half in a distribution.  The other leaving theirs in the plan.  The ERISA book examples do not address multiple beneficiaries electing both options.  Only mention of multiple beneficiaries is if they both take the life expectancy, the oldest beneficiary age in the year following participant's death is used to determine the life expectancy.

 

I looked at the Q&A reg. 1.401(a)(9)-3 Death before RBD:  employee dying before the RBD, thus before distributions are treated as having begun under 401(a)(9), distribution of the entire interest must be made in accordance with one of the methods listed in 401(a)(9)(B)(ii): the 5-year rule or the life expectancy rule.  I am unsure if the language of one method means multiple beneficiaries may take only one option or the other.

 

PLEASE HELP... And, if my analysis seems wrong at any stage, please correct me.

[Peter Gulia]

Along with what you've found so far and the further points you find, consider the potential implications of §1.401(a)(9)-8 Q&As 2 and 3 if beneficiaries' interests are accounted for as separate subaccounts.

https://www.ecfr.gov/cgi-bin/text-idx?SID=783132f42d41792c69aae86a36162f51&mc=true&node=se26.6.1_1401_2a_3_29_3_68&rgn=div8

 

[EHE]

Be careful - the plan document specifies which options are available to the beneficiaries.  It could be both options - Life Expectancy or the 5-year rule - or it could specify either LE OR 5-year and not both.   If the plan specifies both options are available, each bene can make their choice as to which option to use.   And I have seen some plans where neither option is available and the benes must take lump sum distributions. Check the plan document.

[Peter Gulia]

RTFD (Read The Fabulous Document) is a good admonition.

 

[Luke Bailey]

Phlyer's, I would like to emphasize what Fiduciary Guidance Counsel said in his first post. Find where in the plan it states that the account can be divided into separate accounts, one for each beneficiary. It almost certain says that somewhere.

[Phlyers]

Apologize for not asking the right question:  The accounts were to be split and the document permits it.  Since the son is requesting his distribution in this calendar year, the year of death and year prior to RBD, part of the distribution must first satisfy the RMD under 1.401(a)(9)-5.  Under who's life expectancy is this RMD portion calculated? I know a non-spouse beneficiary calculates under their own for the year following the participant death and reduce by 1 in the following years. But is there a cite or reg. somewhere that says how it's calculated this year, is the participant's life expectancy used?  Is it the entire account balance done prior to segregation, or just the son's half afterwards?  The ERISA outline books only tell me that the 5 year rule or life expectancy rule must be satisfied.