Life and Death Planning for Retirement Benefits

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Chapter 1: The Minimum Distribution Rules 31
 But WRERA did NOT change other RMD deadlines: The Beneficiary Finalization
Date remains September 30 of the year after the year of the participant’s death
A)). The date by which a see-through trust must deliver documentation to
the plan administrator remains October 31 of the year after the year of the
participant’s death A)). The date by which multiple beneficiaries must
establish separate accounts for purposes of determining their Applicable
Distribution Period (ADP; remains December 31 of the year after the year
of the participant’s death B)). The participant’s RBD remains April 1 of
the year after the year in which he reaches age 70½ (or retires, whichever is
applicable) for purposes of determining whether he died before or after his RBD
Step 3), even if he reached age 70½ in 2008 or 2009.
 Although in theory there were “no RMDs in 2009,” actually there were two types
of RMDs that had to be paid, even in 2009. One was a 2008 RMD that was
postponed until April 1, 2009 (2008 being the first distribution year); see
A). The other was a skipped RMD from any year earlier than 2009. See
and Part V, A-8.
 For the effect on individuals who turned age 70½ in 2008 or 2009, see
 Despite WRERA’s suspension of RMDs, some plans distributed 2009 “required”
distributions anyway. The IRS granted participants and surviving spouses (but not
other beneficiaries) who received these “nonrequired required distributions” the
right to roll them over within 60 days of receipt (or by November 1, 2009, if later);
see the Special Report: Ancient History .
1.1.05 RMDs under defined plans, “annuitized” DC plans
Defined benefit plans are subject to an entirely different system of RMDs than the defined
contribution (DC) plan system explained in this Chapter. For details on the defined benefit plan
RMD system, see
Advisors need to be aware of this alternative RMD system even if they have nothing to do
with RMD compliance for any defined benefit plan because the defined benefit plan system also
applies to any portion of a DC plan that is “annuitized.” Annuitize is a word that does not appear
in the dictionary; in the IRS lexicon, it means that all or part of an individual’s account in a DC
plan is used to purchase an immediate annuity. For example, suppose a participant wants to use
part of his IRA balance to purchase an immediate annuity from an insurance company, i.e., he
wants to convert that money into a stream of periodic payments that the insurer guarantees will
last for some specified period of time or for specified lives. In exchange for that promise the
participant gives up his ownership of the money turned over to the insurance company.
The IRA owner has two choices regarding how to use his IRA money to buy an immediate
annuity. He can cash out the IRA, pay the resulting income tax, and then buy whatever kind of
annuity contract he wants (and can get an insurer to sell). Or he can buy the contract “inside” the
IRA. If he chooses the latter course, then the defined benefit plan RMD rules step in. These rules
limit what types of annuity contract he can buy and how the contract (and the rest of the IRA) will