Minimum distribution timing for surviving spouse

We have a plan that has a participant who died in 2019 after attaining age 70.5.  Had he survived, his first RMD would have been due by 4/1/2020.  His spouse is his sole beneficiary.  Section 1.401(a)(9)-3 allows her to delay commencing benefits until 2020, however she is electing a distribution now.  Does a distribution now trigger an RMD requirement for 2019?

The fact that a distribution is made to anyone at any time for any reason does not trigger an RMD. RMDs are triggered only by plan language implementing the 401(a)(9) regulations, and the only factors in determining the first calendar year for which an RMD must be paid are (1) age, (2) ownership status (in some cases, depending upon plan language), (3) employment status (in some cases, depending upon plan language), and death (when applicable). After you know the first calendar year for which an RMD must be distributed, then and only then do other issues come into play with regard to whom it must be paid and how much must be paid, and, in the case of death, the period over which all RMDs will be made to a beneficiary (for example, whether the beneficiary is subject to the 5-year method or the lifetime method, and whether or not the spousal rules are to be used when the lifetime method applies).You did not provide all this information. (I am not likely to engage in further analysis, this entire entry is just a roadmap).

If 2019 is the first calendar year that an RMD is required (even if not due until 4/1/20), death does not change that result. When death is the event causing a calendar year to be the first year that an RMD is payable, then the first RMD will be paid or become payable to the participant, not the beneficiary. It will typically be treated as taxable income to the participant's under the final tax return for the participant (income with respect to a decedent). The participant's tax advisor will make that determination.

For the first calendar year that any participant is subject to the RMD requirements (assume 2019 in this case, though not enough facts were presented to guarantee that result), the first money out of the plan for that year must be treated as an RMD until the RMD requirement is fulfilled for that calendar year (2019). That would be true even for a living participant. For example, Q&A #7 of Regulation 1.402(c)-2 states that any amount required to be distributed as an RMD for an RMD "distribution calendar year" (2019 in your example) is to be treated as an RMD. That means that even if the participant had not died, the first money out in 2019 would be treated as an RMD for the participant for 2019 (it would not, for example, have been eligible for rollover treatment by the participant). Death does not change that result.

Assuming that 2019 is the first calendar year for which an RMD is due, then any amount still owed on the 2019 RMD at the time of death (perhaps all of the RMD) is still payable to the participant for 2019 (i.e., reported as income on the participant's tax return for the year of death). Any additional funds payable in 2019 would be paid to the beneficiary in accordance with the plan's distributions on account of a participant's death, but that does not mean there is a 2020 spousal RMD required (though that might be true). The plan document should state that beneficiaries are not subject to the death RMD provisions until the first calendar year following the year of the participant's death. To know what happens for years subsequent to the year of death, you need to evaluate the plan's language as to which Death-RMD distribution method is applicable (the 5-year rule or the spousal lifetime method). In some cases, the document might give the beneficiary the choice of method to use to determine when Death-RMDs must be paid and what the amount will be. In other words, a spouse does not necessarily receive lifetime distributions using the spousal-beneficiary RMD lifetime method. That could occur, for example, if the plan specifies that all Death-RMDs are to be determined using the 5-year rule. Under that 5-year rule, no funds should remain in the plan after that 5th year.

To summarize, the amount payable to the participant for 2019 as an RMD is calculated in accordance with the plan's language for RMDs to participants (up through the year of death). The amount payable for subsequent years is determined in accordance with Death-RMD plan provisions and are payable to the designated beneficiary. If the entire amount is paid to the beneficiary in 2019 (other than the 2019 RMD payable to the participant), then the only RMD for 2019 is the RMD payable to the participant for the year of the participant's death (2019).

This all assumes that 2019 is the first calendar year for which an RMD is required. For example, if a non-owner participant turned age 70 1/2 in 2015 and retired in 2017, and the plan uses the post-SBJPA required beginning date for all participants for all funds, then 2017 would have been the first calendar year for which an RMD was required, and the RMD rules upon death would not apply for a participant who dies in 2019, since RMDs would already have become payable prior to the calendar year of death. in that case, you would then use the plan's rules for determining RMDs for calendar years following participants' death occurring after RMDs have already commenced being paid to participants.

On 11/7/2019 at 2:34 PM, pensiongeek said:

We have a plan that has a participant who died in 2019 after attaining age 70.5.  Had he survived, his first RMD would have been due by 4/1/2020.  His spouse is his sole beneficiary.  Section 1.401(a)(9)-3 allows her to delay commencing benefits until 2020, however she is electing a distribution now.  Does a distribution now trigger an RMD requirement for 2019?

No.  If she keeps the assets in the plan, her first RMD is due 12/31/2020. Anything before 2020 is an optional distribution.