Decedent past required beginning date was receiving RMDs but died this year before receiving 2022 RMD; there is a dispute about who should get the money so plan may not be able to pay before end of year

This is related to a question I asked a few days ago about interpleader, but let's put the interpleader issue aside.

Treas. Reg. 1.401(a)(9)-5, Q&A-4 is pretty clear that the year of death RMD for an individual who was past his or her RBD must be paid to the decedent's beneficiary in the year of death.  But suppose that the plan really can't determine who the beneficiary is, because there are competing possible beneficiaries each of whom raises significant fact issues against the other. These fact issues cannot be resolved by the end of 2022 and it would be imprudent to pay the 2022 RMD (which is a significant amount) to either party by the end of the year. So the plan probably won't pay it to anyone until 2023.

I'm confident that the plan's failure to pay the RMD as required under the regs will be corrected under SCP next year when it pays the amount to one of the parties. I'm also confident that the recipient can easily get the 50% excise tax waived following the normal procedure. If anyone thinks I'm wrong about either of those judgments, please let me know, but otherwise my question is whether anyone is aware of any formal or informal guidance on this subject from IRS (I have not been able to find any) or faced the situation themselves and discussed with someone at IRS. If so, inquiring minds want to know what they said.

Thanks.

Nothing on point in the Gray Book.

In 2017, the Internal Revenue Service issued to its employees (with releases to practitioners and the public) guidance directing IRS examiners not to challenge a plan as failing to meet a § 401(a)(9) provision if the plan’s administrator was unable, after specified efforts, to locate the should-be distributee.

While it is only my reasoning, a plan should not be expected to pay a minimum distribution when the identity of the would-be distributee is unknown.

Further, even without ERISA’s stronger protections, a plan with a provision to meet Internal Revenue Code § 401(a)(2) must be administered for the exclusive benefit of the participant’s beneficiary. It is not proper to pay someone who is not the participant’s beneficiary.

missing participant or beneficiary minimum-distribution memo-for-employee-plans 2017-10-19.pdf

1 hour ago, Peter Gulia said:

In 2017, the Internal Revenue Service issued to its employees (with releases to practitioners and the public) guidance directing IRS examiners not to challenge a plan as failing to meet a § 401(a)(9) provision if the plan’s administrator was unable, after specified efforts, to locate the should-be distributee.

While it is only my reasoning, a plan should not be expected to pay a minimum distribution when the identity of the would-be distributee is unknown.

Further, even without ERISA’s stronger protections, a plan with a provision to meet Internal Revenue Code § 401(a)(2) must be administered for the exclusive benefit of the participant’s beneficiary. It is not proper to pay someone who is not the participant’s beneficiary.

missing participant or beneficiary minimum-distribution memo-for-employee-plans 2017-10-19.pdf 148.36 kB · 0 downloads

Peter, thanks!