Life and Death Planning for Retirement Benefits

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Chapter 1: The Minimum Distribution Rules 81
However, there are plan administrators who take a different view, and require that each
beneficiary to take a proportionate share of the year-of-death RMD.
B. Must subsequent-year RMDs be apportioned? When the interests of multiple
beneficiaries do not meet the requirements for “separate accounts,” it is unclear whether
the distribution requirement is imposed on the collective account (so that the requirement
is satisfied as long as the total RMD amount for the account is distributed to any one or
more of the account beneficiaries); or whether, alternatively, each beneficiary must take
such beneficiary’s pro rata share of the total RMD.
Under the portion of the account payable to a Designated Beneficiary must be
distributed over the life expectancy of that beneficiary; this suggests that each beneficiary has a
personal obligation to take an annual distribution from his share. However, arguably the IRS has
“overruled” this Code provision in its separate account regulations, by providing that: “Except as
otherwise provided ...[under Reg. A-2(a)(2), the separate accounts rule discussed
at , if an employee’s benefit under a defined contribution plan is divided into separate
accounts under the plan, the separate accounts will be aggregated for purposes of satisfying the
rules in section 401(a)(9). Thus, except as otherwise provided in this A-2, all separate
accounts...will be aggregated for purposes of section 401(a)(9).” Reg. A-2(a)(1).
Emphasis added.
If, as this regulation states, the plan is treated as a single account, then a distribution to any
of the beneficiaries would satisfy the distribution requirement.
1.7.07 Simultaneous and close-in-time deaths
Different states have different laws regarding the effect of simultaneous or close-in-time
deaths. State A may presume that the beneficiary predeceased the participant if they die
simultaneously, in a common accident or catastrophe, or otherwise under such circumstances that
it cannot be easily determined who survived whom. State B’s law may provide that the beneficiary
is deemed to have predeceased the participant if the beneficiary dies within 120 hours after his
benefactor. Seymour Goldberg, CPA, author of the “E-Guide,” Inherited IRAs: What the
Practitioner Needs to Know Product #017270PDF), points out that some
states have now adopted the “120-hour rule” as part of the “Uniform Simultaneous Deaths Act.”
Such a law could operate to change the “beneficiary” of an IRA in the case of simultaneous or
close-in-time deaths unless the beneficiary designation form specifically overrides state law
presumptions.
Some beneficiary designation forms provide that if the primary beneficiary fails to survive
the participant by a particular period of time (such as 30 days) he loses the rights to the benefits,
and the contingent beneficiary becomes “the” beneficiary. The IRS has approved a beneficiary
designation that contained such a condition, and recognized the primary beneficiary as the
Designated Beneficiary, where the primary beneficiary did survive for the required period of time.
PLR 2006-10026.
There are no IRS pronouncements regarding who is considered the beneficiary for RMD
purposes if the original beneficiary failed to survive for a period of survival required by the
beneficiary designation form or by applicable state law, so that the formerly-contingent beneficiary
becomes the only person entitled to the benefits. Presumably, as long as the required period of