99 year old decedent failed to take 403(b) RMDs

Submitted by James Magno on Sat, 2020-02-08 22:43

Decedent missed taking RMDs for 403(b)
Does anyone have experience with this issue?
Similar to deficient 1040, would executor file last six years Form 5329? Is there any indication of IRS policy on this issue?
Also I notice that the plan sponsor is required to make RMDs, I see for example protocol that suggests potential loss of qualified plan status. I think that for purposes of the IRS rules that a 403(b) is considered to be a qualified plan
Thanks
Jim



Submitted by Alan - IRA critic on Sat, 2020-02-08 23:18

  • 403b RMDs are problematic because of the 403b RMD aggregation rules that operate just like IRA aggregation rules. An RMD is not due until the end of the year (except for RBD RMD), so when a participant passes the RMD requirement  for the year of death is transferred to the plan beneficiary. Executors do not request RMDs unless the estate is the plan beneficiary. An individual beneficiary is only responsible for completing the year of death RMD, not late RMDs for prior years, and the IRS does not pursue decedents for delinquent RMD penalties. Therefore, the executor has no responsibilty here unless the estate is the plan beneficiary. However, the executor can assists the beneficiary will info from prior tax returns or decedent records to determine if the year of death RMD might have been taken from a different 403b. The decedent’s final return will only report RMDs taken before death and reported on a 1099R.
  • If a beneficiary completes the year of death RMD, they will get the 1099R and the distribution is taxable to the beneficiary that receives the distribution. If the beneficiary fails to complete the RMD by the end of the year of death, they must file a 5329 and request a penalty waiver from the IRS. 
  • A plan is rarely disqualified for infractions, and many plans mess up RMD administration. EPCRS basically only requires late RMDs to be made up ASAP after being discovered, but again a 403b plan has no way to tell if a different 403b was used to complete the RMD other than asking the participant.

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