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Posted

Al, the owner of the company which sponsors the PS-only plan, was taking RMDs and then passed away in 2017.  His two sons, who were his 50/50 beneficiaries and who were participants and now became the 50/50 company owners chose to not take Dad's money out of the plan.  An RMD is being calculated on Al's balance each year and paid to each of the sons (split evenly between the two of them).  The plan does have the 5-year-rule selected (though I thought that was only applicable if the participant died before RBD).

Is there any limit as to how long the sons can keep this going inside the plan?  Is there something that will require them to take Al's money out at some point?  The sons are just over 60 themselves, so they have a few years before they hit RMD status on their own accounts.

Thanks.

Posted

Dad died pre-SECURE Act so kids can take out as stretch payments under the pre-Secure RMD rules on death after RBD, assuming Plan allows. I have to go back a re-read the 401(a)(9) regs whenever this comes up but pretty sure the answer is in there and your Plan document.

Now if your Plan only has the 5 year rule you might be stuck with that. OTOH if you got "begin within 1 year of death for a "designated Beneficiary" and payable over the life of such Beneficiary" or similar language you should be fine with the annual stretch payments provided they satisfy the 401(a) rules and aren't for longer than the life expectancy of the beneficiary.

 

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