non-spouse beneficiary & RMDs

[doombuggy]

Company owner died on 1/1/18.  His 6 children were the benes of his plan assets.  They requested distributions from owner's account last year and each took their share of his 2018 RMD.  They kept the assets in the plan, but the platform allowed them to move the assets to each of their accounts as a rollover.

How do we calculate the RMDs each year?  TIA

[Luke Bailey]

So all six kids are employees of same company and they rolled their distributions back to the employer plan?

[doombuggy]

Yes.  They shouldn't have, they should have taken a Lump Sum or rolled the assets to an inherited IRA.

We are looking to work with the platform to get this fixed, but will need to calculate the 2019 RMD before moving the money out.  I am not sure how to calculate the RMD - using the participant's or the beneficiary life expectancy or a combination of both.

[Luke Bailey]

doombuggy, nonspouse rollovers have to be to an IRA, see IRC sec. 402(c)(11), which I suppose for this purpose would include a deemed IRA in a qualified plan under 408(q), but I think it would have to be a real 408(q) program allowing other employees to make deductible contributions, which you may or may not have. So maybe what happened is the money is still considered in an account within the plan for decedent, and was not distributed and rolled back in, but has been placed "as if" in kids' accounts for investment management.

If above is the case, then the RMD's would just be same as for any DC account where death occurs after RBD.

[Appleby]

On 5/20/2019 at 8:59 AM, doombuggy said:

Company owner died on 1/1/18.  His 6 children were the benes of his plan assets.  They requested distributions from owner's account last year and each took their share of his 2018 RMD.  They kept the assets in the plan, but the platform allowed them to move the assets to each of their accounts as a rollover.

How do we calculate the RMDs each year?  TIA

Do you really mean "rollover" or transfer?  Because, non-spouse beneficiaries cannot rollover inherited plan assets, unless the rollover is a direct-rollover to an Inherited IRA by a designated beneficiary. Were 1099-Rs issued for these transactions?

[doombuggy]

Because of confusion with the generic beneficiary form this platform uses, the plan sponsor thought the 6 non-spouse benes could keep their shares of the dec'd persons assets in the plan.  They all work there and each have an account in the plan already.  The platform processed the pay out like this - all assets were w/d from the dec'd account, a "beneficiary" account was set up in the plan for each of the 6 (so in essence, each had 2 accounts at the platform) then the assets were moved out of the "beneficiary" and moved in to the rollover source of their regular account that they already had.

My question is they will need 2019 RMDs and I need to know HOW to calculate those, as I am not familiar.  Are they still based strictly on the dec'd's age or a combo of the dec'd and the child's age (like the chart we use in certain circumstances when the spouse is more than 10 Yrs younger).

 

Edit to add that the 2018 RMD was distributed to each bene in that process somewhere.  I realize I need to have those asset moved out to an inherited IRA, I am trying to figure out the RMD part at this time.  Thanks.