Life and Death Planning for Retirement Benefits

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34 Life and Death Planning for Retirement Benefits
rule) and (surviving spouse may elect or be deemed to have elected to treat an
inherited IRA as the spouse’s own IRA).
10. The regulations “overrule” the Code. You cannot compute RMDs simply by following
the Internal Revenue Code. The IRS regulations have fundamentally altered the Code’s
approach in several ways. For example, the Code dictates that lifetime distributions must
be made over the life expectancy of the participant or the joint life expectancy of the
participant and his beneficiary. The regulations make the identity and
life expectancy of the beneficiary almost irrelevant; see For other examples, see
(“General Comments”) and
11. RMDs are determined under the rules applicable to the plan that holds the benefits,
not some prior plan where the benefits “used to live” prior to a rollover. Reg
See D).
12. Missing an RMD has consequences. A participant or beneficiary who misses an RMD
becomes liable for a penalty; see
1.2.02 Which distributions count towards the RMD
Regs. A-9(a), and A-11(a), state that, except as otherwise
provided in A-9(b) or A-11(b) of such regulations, or as may later be otherwise provided by other
IRS pronouncements, “all amounts distributed” from a plan or IRA during the applicable
Distribution Year (or grace period; “are taken into account in determining whether
is satisfied….” Distributions before the Distribution Year don’t count; see #8.
Here is the RMD status of various other distributions:
A. Distribution of an annuity contract does NOT count. When an employee’s plan account
or IRA balance is used to purchase an annuity contract, distributions under the contract
must comply with RMD rules. Reg. A-1(e), A-2(a)(3);
se Distribution of a nonassignable annuity contract that complies with the RMD
rules is a nontaxable event G)) and does not count as a distribution for RMD
purposes. Reg. A-10.
B. Corrective and deemed distributions do NOT count. QRP contributions that are
returned to the participant because they exceeded various contribution limits do not count
towards the RMD requirement. Reg. A-9(b)(1)–(3). IRA contributions
returned (together with the “earnings thereon”) by the extended due date of the participant’s
tax return (“corrective distributions”; see do not count. Reg. A-
11(b)(1)–(3). Neither do plan loans that are treated as distributions due to failure to comply
with the plan loan rules A)), or the imputed income arising from life insurance
held by a plan (see . Reg. A-9(b)(4), (6).