Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

on their 2016 birthdays even if one of them dies in 2016 (provided Ginger was still Red’s sole beneficiary at the time of such death) and even if they divorce in 2016 (unless Red changes his beneficiary in 2016 to someone other than Ginger before the divorce).

Taking distributions from multiple plans

This section explains the rules for participants who are taking lifetime RMDs from more than one retirement plan. For rules applicable to beneficiaries taking distributions from inherited plans, see ¶ 1.5.09 instead. A. Qualified plans. If the participant has benefits in more than one qualified retirement plan (QRP), the RMD must be calculated separately for each such plan, and each such plan must distribute the RMD calculated for that plan. Reg. § 1.401(a)(9)-8 , A-1. Thus if he participates in two pension plans and a 401(k) plan, he will receive three separate RMDs (even if all the plans are provided by the same employer). B. IRAs. A different rule applies for IRAs. The RMD must be calculated separately for each IRA, but (with exceptions noted below) the participant is not required to take each IRA’s calculated amount from that IRA. He can total up the RMDs required from all of his IRAs and then take the total amount from one of the IRAs or from any combination of them. Reg. § 1.408-8 , A-9. For purposes of this rule, all traditional IRAs—whether contributory, rollover, SIMPLE, or SEP—are treated the same; they may all be aggregated with each other. Reg. § 1.408-8 , A-2. Beginning with the year an IRA owner reaches age 70½, the IRA provider (on the IRS Form 5498 it must file annually for each IRA it holds) must check the “distribution required” box on the form (Box 11) every year for the rest of the participant’s life. E.g. , for the 2016 Form 5498 (which will be filed in the first half of 2017), Box 11 directs “check if RMD for 2017.” The IRS might attempt to match these forms with Forms 1099-R filed for 2017 by the same IRA provider, reporting distributions from this account. If the participant did not take any distribution from an IRA that had the “distribution required” box checked, he might get an inquiry from the IRS about why there was no distribution taken from this account C even if the participant took the RMD from some other account as permitted by law. However, despite the presumed purpose of all this reporting to the IRS, anecdotal evidence suggests that the IRS is not actively chasing people who skipped RMDs. RMD errors seem to be discovered by individuals and their advisors, not the IRS. C. 403(b) accounts. This optional aggregation rule also applies (separately) to 403(b) accounts. The RMD must be calculated separately for each 403(b) account, but (with exceptions noted below) the participant is not required to take each 403(b) account’s calculated amount from that 403(b) account. He can total up the RMDs required from all Beware Possible Reporting Glitch