WHOSE RMDs ARE THESE?

[Plan Doc]

Participant turned 70-1/2 in 2014 and had a required beginning date of April 1, 2015.  She died April 4, 2015, 3 days after her RBD, without taking any RMDs.  An RMD should also have been made for 2015, the year of the participant's death, but was not.  The participant's account remains completely undistributed because no one was paying attention to it until now, and there is a designated beneficiary.

Can the entire account be paid to the designated beneficiary or must the RMD amounts for the 2014 and/or 2015 distribution calendar years be paid to the participant's estate?  If the estate, any idea of how, if at all, to adjust for earnings, etc.?

Also, it has been suggested that the 2014 and 2015 RMDs be paid to the estate and leave the estate to file Form 5329 and ask for abatement of penalties with respect to those amounts.  But we also have missed RMDs for 2016 - 2019.  Regardless of whether the estate is entitled to part of the account, wouldn't it make more sense, and have a better chance of success, if the plan were to file under VCP both to correct the operational failures due to the missed RMDs and to obtain relief from RMD penalties?  

 

[Bird]

I've always felt that any/all money paid after death should be the designated bene's.  The fact that it is being required under minimum distribution rules doesn't change that, IMO.  

[Plan Doc]

Thanks, Bird.  I'm inclined to think so too, but I have a TPA telling me that the RMD amounts for the first distribution calendar year, which was the year before the participant died, and for the following year, the year of participant's death, though never distributed, belong to the participant's estate rather than the designated beneficiary.

Anyone familiar with any authority on this question?

[Luke Bailey]

On ‎11‎/‎5‎/‎2020 at 7:31 AM, Bird said:

I've always felt that any/all money paid after death should be the designated bene's.  The fact that it is being required under minimum distribution rules doesn't change that, IMO.  

I have advised that in the past. If you read your plan docs and beneficiary designation forms, they will almost certainly say, basically, that everything in the account upon the death of the participant belongs to and is paid to the beneficiary

[FormsRstillmylife]

On behalf of the beneficiary, I am going to claim that the full account distribution needs to be made to me by the fifth anniversary 12/31/2020.  Under CARES, the beneficiary has on more year and can split between 2020 and 2021 to lessen the taxable income.  The plan's failure to pay the participant while alive is not my concern.  The plan should not be able to compel the establishment of an estate and a corrective tax filing to fix its error of 2015.  Back in 20 15, we could have talked about an amount paid to the estate and its debtors, but not in 2020.