Change name on account of deceased employee?

We have a small balance forward 401k plan.  One of the employees died at age 49 and his wife is the beneficiary.  She is also 49.  She wants to leave the money in the plan.  Should we/must we change the name on the account to her name, rather than using her deceased husband's name?  Any other issues we should be aware of?  Thanks!!

Is she a participant and elected to rollover the balance into her own?

What does the Plan say about paying out death benefits and the required timing?

Thanks Lou - yes, I should clarify.  She is already a participant in the plan and has a small balance herself.   The man who died was the owner of the business and his wife works there too and is now running the business.

The plan uses a DATAIR document.

The RMD section of the plan states that if the participant dies before distributions begin and the spouse is the bene, distributions will begin by the later of 12/31 of the calendar year following the participant's death OR by 12/31 of the year in which participant would have been 70 1/2. 

However, isn't there a requirement that the wife must take a distribution each year based on her life expectancy if the account stays in her husbands name?

OR she could roll it into her 401k account in the plan and not have to take any RMDs until she is 75?  But she will be subject to 10% early penalty on any withdrawals prior to 59 1/2 (?)

I can't find a good resource that clearly explains the options/requirements on this situation.

Thanks!

If the document allows she can delay until her husband would have received RMD. If leaving it in the Plan, it's probably best to leave in the deceased husband's name at least until she turn 59 1/2 unless there are other reasons she needs to access the funds but she might want to discuss with her estate planning attorney or financial advisor. The main reason being is if she rolls it over into her name she will lose the ability to treat distributions as death benefit distributions that are not subject to the 10% excise tax.

Thank you!!

SECURE 2.0 also includes a provision (Section 327) that allows a surviving spouse as sole beneficiary to elect to treat their inherited interest in the plan as if they were the employee starting with distribution calendar years in 2024 and later (sort of like the rule that applies to allow IRAs inherited by spouses to be treated as if they were their own).

If a spouse elects to treat their inherited interest as their own (as if they were the employee), this would change the date when RMDs are required to begin (to no earlier than when the spouse attains RMD age rather than 12/31 of the year the dead participant would have attained RMD age) and for purposes of calculating the RMDs (so they can use uniform lifetime table factor instead of single life table factor for years after the year of the employee's death). 

I think we need guidance from IRS on the following: 

• Whether it's optional or mandatory for plans to offer this election to spouses. 
• Exactly when is the spouse be required to begin if they elect to treat as their own? For example, would it be 4/1 after end of year the spouse hits the RMD age - as would be the case if they are actually treated like the employee, 12/31 of the year in which the spouse hits RMD age, or the actual date the spouse attains the RMD age? 
• When exactly does the election have to be made by the spouse? Can spouse put it off until the earlier of when either the spouse or the participant would have had an RMD required?
• If the employee doesn't make an affirmative election and doesn't take an RMD in time based on the employee's birth date - would a deemed election apply as would be the case with an IRA inherited by a spouse? Such a rule could help spouses avoid RMD penalties in a lot of cases.   Is this type of provision something a plan would have to include a provision for, or will plans be subject to some sort of default rule in the regulations unless the plan affirmatively says it will not apply? 
• If a spouse elects to treat as his/her own and then starts before the spouse attains 59 1/2, would spouse's distributions then become subject to 10% penalty tax before age 59 1/2? I would think so, and that in order to avoid this possibility, it may make sense for the spouse to wait until after the earlier of when the spouse turns 59 1/2 or when the spouse would be required to take an RMD based on participant's age. 
• What changes are needed to the special tax notice in 2024 or later for this rule? 
• Can a spouse who treats their inherited interest as their own name a subsequent spouse as a beneficiary and can that subsequent spouse also elect to treat their account as their own? 
• Can this rule be applied to a QPSA under a DB plan? I would think so, but typically QPSA is only payable as life annuity and spouse wouldn't get choice of optional forms like the employee and generally couldn't elect a J&S under 401(a)(9). Is it ok to only allow life annuity if spouse elects to treats as her own? If a DB plan is required to, or allowed to permit a spouse to elect forms of payment that provide for another beneficiary for life, are there any new incidental death benefit limits to watch out for? 
• Does this rule mean that a spouse/former spouse Alternate Payee under a QDRO can also apply this rule to delay their commencement date?  If the QDRO is silent, is the plan required to offer AP an election to treat account as her own if it offers surviving spouses such an election?