1099-R Death benefit Spouse

Husband and wife work for the same company.  Husband holds private stock in the 401(k)retirement plan.  Husband passes away.  Since the stock is held in the plan fbo husband will a 1099-R code "G" be needed?  None of the assets actually leave the plan they will be transferred to the spouses participant account.

If the wife is rolling it from her late husband's account in the plan to her own account in the plan then yes a 1099-R with code G will be required. Possibly 4G I haven't double checked the instructions on death benefit rollovers.

If it hasn't been combined I would think about not doing so. 

Often times the two sets of money have slightly different rights and benefit attached to them.

For example, she can mostly take their late husband's money at any time as a beneficiary and her money she might not have any in-service withdrawal rights. 

There is a good chance both are over 59.5 but if she isn't she could take those funds and get a death code on a 1099-R and not her money. 

I see this situation about once every couple of years and we always leave the two accounts separate.  We might rename the one into her name as beneficiary to make it clear whose money it is but I think mixing the money is a bad practice.  

The exception would be if she actually signed a distribution form that gave her the option to take the money, put it in an IRA and she specifically said she wants it rolled to her account in the plan.   But I wouldn't just tell her the plan is going to merge the two accounts. 

Rollover of a death benefit needs codes 4G on the 1099-R. It's mentioned starting at the bottom of page 14 of the instructions.

As mentioned, depending on the ages of those involved, it may or may not be to the surviving spouse's benefit to roll over the distribution into an account in her name.  We had a couple of these recently where the deceased was older than the surviving spouse and rolling the death benefit into an account in the surviving spouse's name significantly reduced the RMDs going forward.  Our plans allow distribution of rollover accounts at any time, so they still have access to the funds after the rollover.  We've also had a couple of cases where the surviving spouse was under 59.5 and better off keeping it as a death benefit.