Beneficiary Designation Form Confim

Submitted by Jason Hochstadt on Tue, 2015-12-01 15:54

Hello,

I just want to confirm that a 401(k) Plan participant who fails to complete a Beneficiary Designation Form and passes away requires whoever inherits the account to withdraw it over 5 years – as opposed to being able to stretch the distribution over the life expectancy of the beneficiary. In this example, assume simplicity there is a husband and wife w/ no children – so the wife would receive the account. However:

1. If no Beneficiary Designation Form, must she withdraw the full account value within 5 years?

2. Also, had there been a Beneficiary Designation Form wouldn’t she have the ability to either remain as beneficiary OR roll over the 401(k) Plan into her own IRA? Does the spouse still have the ability to perform a rollover absent a Beneficiary Designation Form on file for the deceased spouse’s 401(k) Plan?

Thank you.

Jason



Submitted by Alan - IRA critic on Tue, 2015-12-01 18:52

  1. No. Under a 401k plan the surviving spouse is deemed to be the beneficiary unless they have signed a waiver. Therefore, even if no beneficiary form, the surviving spouse is treated as a designated beneficiary and could either remain as such or roll it over to her own IRA or Roth IRA. If participant was not married at the time of death and the plan provisions specified the estate as the beneficiary, the 5 year rule would apply if the participant passed prior to the required beginning date. If they passed after the RBD, then the plan could be stretched over the participant’s remaining life expectancy.
  2. a) Correct.   b) Several IRS letter rulings have allowed a surviving spouse to rollover her interest as an estate beneficiary. It’s easier if she is also the executor and sole beneficiary under the will. But this should not be necessary given her automatic status as direct beneficiary.
  3. NOTE: Some plans may require the marriage to have been in place for 1 year to trigger the automatic spousal beneficiary provision.


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