Life and Death Planning for Retirement Benefits

TABLE OF CONTENTS: DETAILED

CHANGES CORRESPONDING TO 7 TH PRINT EDITION (2011) ...............................................3

INTRODUCTION ..............................................................................................................................26

Terminology Used in this Book...................................................................................................27 Abbreviations and Symbols .........................................................................................................28

CHAPTER 1: THE MINIMUM DISTRIBUTION RULES...........................................................30

1.1 I NTRODUCTION TO THE RMD R ULES ........................................................................................30 Where to find the law.............................................................................................................30 Which plans are subject to the RMD rules ...........................................................................31 RMD economics: The value of deferral ...............................................................................31 WRERA suspended RMDs for 2009 ....................................................................................32 RMDs under DB plans and “annuitized” DC plans .............................................................33 Planning for change?..............................................................................................................34 1.2 RMD F UNDAMENTALS ..............................................................................................................34 The 12 Fundamental Laws of RMDs ....................................................................................34 Which distributions do or do not count towards the RMD..................................................36 Tables to determine Applicable Distribution Period (ADP) ...............................................37 Meaning of “age”, “methods of computing “life expectancy” ............................................38 How to determine “account balance” for RMD purposes ...................................................39 How rollovers impact calculation of RMD ..........................................................................40 Adjustment for post-year-end recharacterizations ...............................................................42 Valuation rules for determining account balance.................................................................42 1.3 RMD S D URING P ARTICIPANT ’ S L IFE ........................................................................................44 Road Map: How to compute lifetime RMDs .......................................................................44 The Uniform Lifetime Table: Good news for retirees .........................................................45 Lifetime RMDs: Much-younger-spouse method .................................................................46 Taking distributions from multiple plans .............................................................................48 Separate accounts within a single plan .................................................................................49 1.4 T HE RBD AND F IRST D ISTRIBUTION Y EAR ...............................................................................49 Required Beginning Date (RBD); Distribution Year...........................................................50 RBD for IRAs and Roth IRAs...............................................................................................50 QRPs: RBD for 5-percent owner ..........................................................................................51 QRPs, cont.: RBD for non-5-percent owner.........................................................................51 RBD for 403(b) plans (including “grandfather rule”)..........................................................52 What “retires” means; rollover in retirement year ...............................................................53 RBD versus first Distribution Year: The limbo period........................................................54 Grandfather rule: TEFRA 242(b) elections ..........................................................................56 1.5 RMD S AFTER THE P ARTICIPANT ’ S D EATH ................................................................................57 Overview of the post-death RMD rules ................................................................................58 Road Map for determining post-death RMDs ......................................................................59 Road Map, cont.: RMDs in case of death BEFORE the RBD ............................................61