Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

part or all of his 2007 and 2008 RMDs before his death, his death would still be “before” his RBD for purposes of computing post-death RMDs. This conclusion is based on the following authorities:  § 401(a)(9)(B)(i) provides that the “at-least-as-rapidly rule” applies “if distribution of the employee’s interest has begun” in accordance with § 401(a)(9)(A)(ii) (the lifetime minimum distribution rules). Reg. § 1.401(a)(9)-2 , A-6, provides that “distributions are not treated as having begun to the employee [for that purpose] ...until the employee’s [RBD] .... Thus, § 401(a)(9)(B)(i) [the at-least-as-rapidly rule] only applies if an employee dies on or after the employee’s” RBD. Emphasis added.  “ If an employee dies on or after the required beginning date , the distribution period applicable for calculating the amount that must be distributed during the distribution calendar year that includes the employee’s death is determined as if the employee had lived throughout that year.” Reg. § 1.401(a)(9)-5 , A-4(a). Emphasis added. This is the only regulation that explicitly states a rule for the year of death. A-5 (which covers post-death RMDs in case of deaths both before and after the RBD) begins in each case with the year after the year of death.  If the surviving spouse is the sole beneficiary of a deceased participant’s IRA and elects to treat the IRA as her own ( ¶ 3.2.03 ), Reg. § 1.408-8 , A-5(a) provides that, if the spousal election is made in the year of the participant’s death, “the spouse is required to take a required minimum distribution for that year, determined with respect to the deceased IRA owner under the rules of A-4(a) of section 1.401(a)(9)-5, to the extent such a distribution was not made to the IRA owner before death.” The referenced regulation is the one that says the balance of the year-of-death RMD must be taken by the beneficiary “if the employee dies on or after ” the RBD. Emphasis added.  Finally, Reg. § 1.401(a)(9)-3 , A-1, provides that, if the employee dies before his RBD, “distribution of the employee’s entire interest must be made in accordance with” the rules of § 401(a)(9)(B)(ii) , (iii) , and (iv) . Those subsections refer only to the 5-year rule and payouts over the life expectancy of the designated beneficiary, with no reference to taking any distribution that the decedent would have been required to take had he not died. These regulations lead to the conclusion that, since the decedent was not required to take an RMD for the age 70½ (or age 71½) year(s) if he died before his RBD, the beneficiary is not required to take the balance of the RMD for the year of death, because there is no RMD to take the balance of. There is no authority that contradicts this conclusion. 1.4.08 Grandfather rule: TEFRA 242(b) elections TEFRA (1982) significantly expanded the coverage and stringency of the minimum distribution rules. TEFRA contained a grandfather rule, § 242(b)(2), which provided that, despite the new rules, a plan would not be disqualified “by reason of distributions under a designation (before January 1, 1984) by any employee of a method of distribution...(A) which does not meet the requirements of [ § 401(a)(9) ], but (B) which would not have disqualified such [plan] under [ § 401(a)(9) ] as in effect before the amendment” made by TEFRA. TRA ’84 (which made more changes) continued the TEFRA grandfather rule: The TRA ’84 changes would not apply to