Non-spouse retirement plan death benefit rollover

Submitted by Ryan Smith on Thu, 2020-01-30 18:34

Female client has State of Florida FRS retirement plan. She actually received this as a beneficiary of her ex-husband. She received this after they were already divorced and then he died. She has not taken any distributions from the plan and has not rollover any money to an IRA. She just received a notice that the 5 year anniversary year of his death. The notice says that the client has to take a full distribution and cannot roll funds out as she is in the 5th year of the plan. The plan is telling us that not being able to roll in the 5 year is an IRS rule and they will not allow it. Questions:
1. Where is this stated in the IRS rules that you cannot roll in year 5?
2. Is there anyway to go back on this 5 year benefit and take withdrawals to satisfy the beneficiary RMD requirements?



Submitted by Alan - IRA critic on Thu, 2020-01-30 23:22

  • This sounds like a situation where the participant passed prior to the RBD and the plan specified that the 5 year rule applies, perhaps mandatory or subject to election by the end of the year following the year of death (IRS Reg, 1.401(a)(9)-3). In those cases, if no action is taken prior to the 5th year, the entire balance of the plan is treated as the RMD in the final year. As such none of it is eligible for rollover (Reg 1.402(c)(2) QA 7.).
  •  If death was NOT prior to RBD please advise. Did client receive a portion of the account via a QDRO? If so RMDs are typically triggered by the age of the participant or by participant’s death.
  •  Was client notified at any time in the past what her options were, and the deadline to make such elections?

Submitted by Ryan Smith on Tue, 2020-02-04 13:26

Death was before RBD, client was notified, so she has to take it all out then.  Thanks. 

Submitted by Ryan Smith on Tue, 2020-02-04 13:26

Death was before RBD, client was notified, so she has to take it all out then.  Thanks. 

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