Life and Death Planning for Retirement Benefits

Chapter 1: The Minimum Distribution Rules

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If the participant dies prior to his RBD, and the spouse is the sole Designated Beneficiary ( ¶ 1.6.02 ), annual distributions to the spouse over her life expectancy do not have to begin until the later of the following years, “X” or “Y”:

X:

The year following the year in which the participant died; or

Y:

The year in which the participant would have reached age 70½.

§ 401(a)(9)(B)(iv)(I) ; Reg. § 1.401(a)(9)-3 , A-3(b). Thus, the surviving spouse’s “Required Commencement Date” is December 31 of whichever of the above two years (X or Y) is applicable. However, the spouse may have to make an irrevocable election earlier than that deadline to preserve her rights; see ¶ 1.5.07 (C).

If both spouses die before the participant reached 70 ½: The (B)(iv)(II) rule

If the participant died before his RBD, and his spouse survives him and is the sole Designated Beneficiary ( ¶ 1.6.02 ), the spouse does not have to commence taking RMDs until the end of the year in which the participant would have reached age 70½, as explained at ¶ 1.6.04 . § 401(a)(9)(B)(iv)(II) then provides a special rule that applies upon the surviving spouse’s later death if she dies before this “Required Commencement Date.” Under the special (B)(iv)(II) rule , RMDs for years after the year of the spouse’s death will not be based on the spouse’s remaining life expectancy, as would normally be true for RMDs payable to successor beneficiaries (see ¶ 1.5.13 , ¶ 1.6.03 (E)). Rather, a new distribution period starts: The post-death rules of § 401(a)(9)(B)(ii) and (iii) will be applied “as if the surviving spouse were the employee” for purposes of determining RMDs to the successor beneficiary(ies) after her death. This means that the benefits will have to be distributed either over the life expectancy of the surviving spouse’s Designated Beneficiary or under the 5-year rule ( ¶ 1.5.07 ). A. Rule applies only if participant died before his RBD. Under the structure of § 401(a)(9) , the (B)(iv)(II) rule can apply only if the participant dies before his RBD. See Reg. § 1.401(a)(9)-3 , A-1, confirming that § 401(a)(9)(B)(ii) , (iii) , and (iv) apply only if the employee (participant) “dies before the employee’s required beginning date (and, thus, before distributions are treated as having begun in accordance with section 401(a)(9)(A)(ii)).” Reg. § 1.401(a)(9)-5 , A-5(b), reiterates that the special rules of “(B)(iv)” apply only if the employee dies before his RBD, as does IRS Publication 575 (2015), p. 37. (For the record, in PLR 2009-45011, the IRS erroneously applied the (B)(iv)(II) rule in a case where the participant died after his RBD.) B. … And spouse dies before her Required Commencement Date. The second condition that must exist for the (B)(iv)(II) rule to apply is that the surviving spouse-sole beneficiary of the account “dies before the distributions to such spouse begin.” § 401(a)(9)(B)(iv)(II) . Under the regulations, the date distributions “begin” means the date distributions are required to begin , not when they actually begin ; and that Required Commencement Date The (B)(iv)(II) rule is quite confusing, so must be reviewed in detail: