401(a) qualified plan – death benefit distribution
What are the death benefit distribution requirements for a 401(a) qualified plan. I’m working on an estate administration – we received the application for death benefit. The application says that the distribution is not eligible for rollover. The death benefit came from the State Universities Retirement System (SURS). The decedent died at age 59. I need to understand how to handle the distribution. The application gave us only 2 options for distribution; 1 check mailed to administrator, 2 direct deposit into a bank checking or savings account. Since SURS is a a 401(a) qualified plan, what do we need to do as far as the distribution is concerned. Do we need to be concerned with the 5 year rule as with an IRA. I don’t know what the distribution requirements are for a 401(a) qualified plan. I read some topics online and it’s still not clear.
thank you. I look forward to your answer.
Christine Brewer
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Permalink Submitted by Alan - IRA critic on Thu, 2016-11-10 22:39
There could have been a direct rollover to an inherited IRA had a desigated beneficiary been named for the plan or if a qualified trust was named. For an estate beneficiary there is no rollover option. See Q 11 of Notice 2007-7 which explains Sec 829 of the PPA. Since the participant passed prior to the required beginning date, the 5 year rule will apply per IRS RMD regs. However, the plan apparently has even more restrictive provisions in limiting the estate to a lump sum distribution. You might press the plan to disclose the provision in the plan that requires a lump sum distribution, since that would result in a large tax bill for the estate or for the estate beneficiaries when the lump sum income is passed through to the estate beneficiaries. The only good thing is that the estate will not have to stay open to receive distributions over the 5 year period.