Life and Death Planning for Retirement Benefits

Chapter 1: The Minimum Distribution Rules

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5-year rule; see ¶ 1.5.07 for how to determine which applies. See ¶ 1.5.05 for how to calculate annual distributions over the life expectancy of the oldest beneficiary, and when such distributions must commence. See ¶ 1.5.06 for how to calculate distributions under the 5-year rule. 1.5.04 Road Map, cont.: RMDs in case of death AFTER the RBD To determine required distributions for the retirement benefits of a participant who died on or after his RBD, first complete the steps at ¶ 1.5.02 . Then read this ¶ 1.5.04 . First read the general comments and caveats. Then read paragraph A. Then read the particular paragraph (B–F) that describes the beneficiary in your case. General Comments and Caveats The rules in this ¶ 1.5.04 apply if the participant died on or after the RBD, regardless of whether the participant actually took any distributions before he died. Reg. § 1.401(a)(9)- 2 , A-6(a). Post-death RMDs from a Roth IRA are never determined using rules in this ¶ 1.5.04 ; see ¶ 1.5.03 instead. Reg. § 1.408A-6 , A-14(b). Annual RMDs under paragraphs B–F must generally begin no later than the end of the year after the year of the participant’s death. Reg. § 1.401(a)(9)-2 , A-5. The exception: If the participant died in 2008, this Required Commencement Date is extended to December 31, 2010; see ¶ 1.5.05 (B), ¶ 1.5.08 . In addition, an RMD for the year of death itself may be required; see “A” below. In all cases, see ¶ 1.5.10 for the ability of the plan to require faster distribution of the benefits than the RMD rules would require. See ¶ 3.2 regarding the ability of the participant’s surviving spouse to roll benefits over to her own IRA (or elect to treat an inherited IRA as her own); see ¶ 1.6.03 (A), (B), for RMD effects of such a rollover or election. Under the final regulations ( ¶ 1.1.01 ), the life expectancy of the beneficiary payout method is available to a Designated Beneficiary regardless of who (if anyone) was the participant’s beneficiary as of the RBD. This is in contrast to the pre-2001 proposed RMD regulations, which would have severely limited post-death payout options once the participant lived past his RBD. The Code provides that, if the participant dies after the RBD, the remaining portion of the participant’s benefits “will be distributed at least as rapidly as under the method of distributions being used” to calculate the participant’s RMDs during life. § 401(a)(9)(B)(i) . This is called the “ at-least-as-rapidly rule .” The regulations pay lip service to the rule (see Reg. § 1.401(a)(9)-2 , A-5), but make no attempt to comply with it . When a participant dies after the RBD the rate at which he was taking (or was required to take) his lifetime RMDs has no bearing whatever on the determination of RMDs after the year of his death. The “at-least- as-rapidly rule” has been administratively repealed by the IRS. A. RMD for year of death (regardless of who is the beneficiary). If the participant died on or after his RBD, and had not yet taken the entire RMD for the year of death, the balance must be taken by the end of that year by the beneficiary of the account. The amount of the RMD for the year of death is whatever the decedent was required to take (because the