Case of the Week: Beneficiary Distribution Options Post-SECURE Act

• Spouse
• Disabled or chronically ill individuals
• Individuals who are not more than 10 years younger than the employee (or IRA owner), or
• Children of the employee (or IRA owner) who have not reached the age of majority

Terms of the plan or IRA agreement will specify, but generally:

Death before required beginning date (RBD)

• Five-year rule
• Single life expectancy payments
• Lump sum
• IRA transfer to own IRA "treat as own" (spouse beneficiary only)
• Rollover
  • Spouse EDB may roll over his or her share from an IRA or qualified plan into his/her own IRA or eligible plan
  • Non-spouse EDB may roll over his or her share of an employer plan to a beneficiary IRA

Death on or after RBD

• Single life expectancy payments
• Lump sum
• IRA transfer to own IRA "treat as own" (spouse EDB only)

Terms of the plan or IRA agreement will specify, but generally:

• Timing of death does not matter (i.e., no before or after RBD differentiation)
• 10-year rule—account depleted within 10 years of death
• Lump sum
• Rollover—non-EDB may roll over his or her share of an employer plan to a beneficiary IRA, but payout remains subject to 10-year rule

Death before RBD

• Lump sum
• Five-year rule

Death on or after RBD

• Lump sum
• Single life expectancy payments

A qualified trust is one that meets the following requirements of Treas. Reg. 1.401(a)(9)-4, Q&A 5(b).

• the trust is valid under state law;
• the trust is irrevocable (either during the IRA owner or plan participant’s life or becomes so at his or her death);
• the trust has identifiable beneficiaries; and
• the trustee of the trust provides the IRA or plan administrator with a copy of the trust instrument (or qualifying trust documentation) by October 31 of the year following the year of the IRA owner or plan participant’s death.

EDB—See above

Death before RBD

• Lump sum
• Five-year rule
• Single life expectancy payments

Death on or after RBD

• Lump sum
• Single life expectancy payments
• Rollovers:
  • Spouse EDB rollover only allowed with private letter ruling
  • Non-spouse EDB may roll over his or her share of an employer plan to a beneficiary IRA with the trust named as beneficiary

Qualified trust: see above

Non-EDB: see above

Timing of death does not matter (i.e., no before or after RBD differentiation)

• 10-year rule
• Lump sum
• Rollover: Non-EDB may roll over his or her share of an employer plan to a beneficiary IRA with the trust named as beneficiary, but payout remains subject to 10-year rule