SIMPLE IRA of deceased employee
I have a client whose husband died in 2016 with a SIMPLE IRA, including contributions in 2016. He was 70.5 at the time of passing. Will there need to be RMD taken from his SIMPLE prior to 4/1/2017? Also can she transfer the balance into her own IRA and/or is the transfer subject to 25% penalty for the 2016 contribution?
Permalink Submitted by Alan - IRA critic on Thu, 2017-02-16 01:39
If 4/1/2017 is his required beginning date, then he passed prior to his RBD and there is no 2016 RMD required. There is never an early distribution penalty for a death distribution (neither 25% or 10%). However, the 2 year participation requirement limiting rollovers to another SIMPLE IRA continues to apply, so she cannot do the spousal rollover until at least two years has passed since his first SIMPLE contribution. A distribution would be taxable and not eligible for rollover even though there would be no penalty. Of course, that would not affect her 2017 beneficiary RMD since those cannot be rolled over anyway. Therefore, she needs to determine when he made his first contribution to this SIMPLE IRA.