Life and Death Planning for Retirement Benefits

71 / 507

Chapter 1: The Minimum Distribution Rules 71
If the spouse makes the election in any year after the year of the participant’s death, her
election is retroactive to the beginning of the year the election occurs, so RMDs will be calculated
based on her being the participant beginning with the year of the election. Reg. A-5(a),
fifth and sixth sentences. The “account balance” used to compute the RMD for a
traditional IRA for the year of the election in this case is (presumably; there is no IRS
pronouncement on point) the prior year-end balance of the elected account, even though the
account was not “hers” in such prior year.
C. If spouse is oldest of multiple Designated Beneficiaries. If benefits are left to a see-
through trust of which the surviving spouse is the oldest beneficiary, but of which
the spouse is not the sole beneficiary, then the trust’s ADP is the life expectancy of the
surviving spouse computed just as if the oldest Designated Beneficiary were someone other
than the spouse. Reg. A-5(c)(1); see D), D), ¶ 1.5.05.
When this rule applies, the spouse’s later death will have no impact on the ADP; see “E”
below.
D. During spouse’s life, if spouse is sole Designated Beneficiary. If the spouse is the sole
beneficiary of the deceased participant; or if a trust is the sole beneficiary and the spouse
is deemed to be the sole beneficiary of the trust (see A), (B)); then the ADP for
distributions to the spouse (or such trust) will generally be the surviving spouse’s life
expectancy. (The exceptions would be, if the participant died before his RBD and the
spouse or trust elected or was defaulted into the 5-year rule, or if the participant
died after his RBD and the ADP is what would have been the participant’s life expectancy
because the participant was younger than the surviving spouse, B).) The spouse’s
life expectancy will be determined using the Single Life Table and the spouse’s
age on her birthday in each year for which a distribution is required (recalculation method;
A)). Reg. A-5(c)(2) (first sentence), A-6. See for how to
determine whether the spouse is the “sole beneficiary.” For the effect of the 2009 one-year
suspension of RMDs, see ¶ 1.5.05(D).
Josephine Example: Napoleon died, after his RBD, leaving his 401(k) plan to his younger
surviving spouse, Josephine, as sole beneficiary. She is taking annual RMDs as Napoleon’s
beneficiary; she did not roll over the benefits to her own retirement plan. Each year, the plan sends
an RMD to Josephine based on her life expectancy (from the Single Life Table) for her attained
age on her birthday in the year of the distribution (i.e., her age as of the end of each Distribution
Year). Josephine turned 46 in the year after Napoleon’s death, so her “divisor” (ADP) for the first
Distribution Year was 37.9. For the second Distribution Year, Josephine’s divisor is not 36.9 (37.9
minus one—as it would be under the fixed-term method; see Diane Example, ¶ 1.5.05(A)); instead
Josephine’s second year divisor is 37.0 (the life expectancy of a person age 47). Josephine, as a
surviving spouse-sole beneficiary, determines her divisor each year by going back to the Single
Life Table and determining her new life expectancy based on her new age (recalculation method).
E. Note that the spouse does not have to “elect” to use the recalculation method; that’s just
how her RMDs are determined. If a surviving spouse made a mistake, for example, and
computed her RMDs using the fixed-term method, that would not change the amount of
her actual RMD; it would just mean that she was taking larger distributions than she was
required to take. If she caught her error quickly enough, she could roll the excess back into
a tax-deferred account to avoid paying tax on it. RMDs to spouse’s successor