Inherited 403(b) - four beneficiaries at 9/30/2019

Submitted by James Magno on Tue, 2020-03-10 23:05

Dad dies in 2018. 403(b) account is left to spouse,. She disclaims 75% so that the account then has four beneficiaries. If the account remains in place on 9/30/2019- one account with four beneficiaries,
Regs indicate that spouse (“disclaiming person”)is not considered in determining designated beneficiary. However in this case she continues to hold an interest because she did not disclaim all.
My question: it appears that the life expectancy of the oldest beneficiary is applied and that the oldest beneficiary is the surviving spouse- does that appear to be correct?
Jim

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Permalink Submitted by Alan - IRA critic on Wed, 2020-03-11 00:12

Not necessarily. The separate account rules apply to plans other than IRAs as well, so if the plan had created separate accounting (not necessarily separate accounts) for each beneficiary by 12/31/2019, they can each use their own life expectancy for RMDs. However, the spouse in particular should have rolled over her share to an IRA by now and when that happens she can figure her RMD from the Uniform Table for years after the spousal rollover. The other non spouse beneficiaries can also do direct rollovers to inherited IRAs (I assume they were contingent beneficiaries) at any time, but if the 403b indicates that separate accounting had not been established by 12/31/2019, their RMDs will have to be based on the oldest of the 4 (including spouse) whether they do a direct rollover to an inherited IRA or not. The spouse can escape this with the spousal rollover, but not the others. All of them are better of with their own IRA (spouse), and their own inherited IRAs (others). FInally, have the 2019 beneficiary RMDs been distributed? Hopefully, this hasn’t morphed into a 5 year rule situation for the other 3 based on any 403b election requirements if Dad passed prior to RBD, since after the end of 2019 the RMDs for the 3 are locked in with or without rollovers to inherited IRAs. Spouse, however can escape any mess with the spousal rollover, but will have to now take the 2020 RMD before she can do that rollover.