Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

beneficiary (or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated beneficiary).” § 401(a)(9)(A)(ii) . 1.3.03 Lifetime RMDs: Much-younger-spouse method As generous as the Uniform Lifetime Table is, the participant enjoys even smaller RMDs if his sole beneficiary is his more-than-10-years-younger spouse. “[I]f the sole designated beneficiary of an employee is the employee’s surviving spouse, for required minimum distributions during the employee’s lifetime, the applicable distribution period is the longer of the distribution period determined in accordance with [the Uniform Lifetime Table] or the joint life expectancy of the employee and spouse using the employee’s and spouse’s attained ages as of the employee’s and the spouse’s birthdays in the distribution calendar year.” Reg. § 1.401(a)(9)-5 , A-4(b) (emphasis added). Note that this formulation mandates annual recalculation ( ¶ 1.2.04 (A)) of the participant’s and spouse’s life expectancies. dsmaller RMDs than the Uniform Lifetime Table if the spouse-beneficiary was born in a year more than ten years later than the year of the participant’s birth. For example, if the participant was born in 1941, the joint table will provide larger divisors than the Uniform Lifetime Table if the spouse was born in 1952 or later. See ¶ 1.3.05 regarding separate accounts; and note the following additional points regarding this method: A. No election required. The participant does not have to elect to use the joint life expectancy of the participant and spouse as his ADP. If the participant’s spouse is his sole beneficiary, then the participant’s divisor is automatically the ADP determined under the Uniform Lifetime Table, or under the Joint and Last Survivor Table, whichever is larger. B. Tests for whether spouse is sole beneficiary. The spouse is the sole Designated Beneficiary for purposes of determining the participant’s RMDs “if the spouse is the sole beneficiary of the employee’s entire interest at all times during the distribution calendar year.” Reg. § 1.401(a)(9)-5 , A-4(b)(1). Marital status is determined on January 1 of each Distribution Year for purposes of computing that year’s RMD; therefore the death of either spouse, or a divorce , during the Distribution Year does not cause the spouse to lose her status as “spouse” until the following calendar year. The spouse is deemed to be the “sole beneficiary” for the entire year if she is the sole beneficiary on January 1 of the year and the participant does not change his beneficiary designation prior to the end of the calendar year (or prior to the spouse’s death, if earlier). Reg. § 1.401(a)(9)-5 , A-4(b)(2). “Sole beneficiary” means sole primary beneficiary; see ¶ 1.6.02 , ¶ 1.7.02 . C. Post-RBD changes permitted. It is not required that the participant and spouse be married on the RBD or any other date prior to January 1 of the Distribution Year in question. If the participant has named some other beneficiary, he can change the beneficiary to his spouse (or marry after his RBD and name his new spouse as beneficiary); the determination of which table applies is made separately each Distribution Year. 1.3.04 Taking distributions from multiple plans