RMDs for non-spouse, non EDB
Client date of death was feb 2020. Son inherited the 403a account. the company sent him an RMD in 2021. the son thought he was under the 10 year rule. the decedent was of RMD age at death, 80. the company is stating that since the account is a “group” account RMDs must occur annually and can’t use 10 year rule.
Please advise, thank you
Permalink Submitted by Alan - IRA critic on Wed, 2021-11-10 19:40
The Secure Act does not apply to deaths prior to 2022 for govt plans or plans under a collective bargaining agreement (union plan). “Group” may have been their way of describing a collective bargaining agreement. Was client in a union, or work for a govt employer?
Permalink Submitted by Marvin Rauchbach on Thu, 2021-11-11 16:54
The decendent was not part of a union, but a spousal beneficary whose husband worked at a public university. do you think that qualifies as a “governmental”? it does for other plans at the university ( 457(b) ), but this is 403a.
Permalink Submitted by Alan - IRA critic on Thu, 2021-11-11 19:33
While the plan is a govt plan, there is also an exemption for certain annuities, and a 403(a) is usually a group annuity, which likely explains the “group” explanation from the plan. Such annuities are not subject to the Secure provisions at all and not for 2022 and later deaths. See the following explanation for the annuity exception to the Secure Act beneficiary RMD provisions:
“Annuities in which individuals have already irrevocably annuitized over a life or joint life expectancy, or in which an individual has elected an irrevocable income option that will begin at a later point, are exempt entirely (and simply follow the already-binding contractual provisions of the annuitized contract).”
Therefore, the 10 year rule apparently does not apply for two different reasons, the govt employer and the 403(a) annuity plan.
Permalink Submitted by Marvin Rauchbach on Mon, 2021-11-15 20:30
thanks for all your information. seems like the most logical step now is if the beneficiary wants to delay the RMDs and be under the 10 year rule, is there any reason why the “governmental plan” beneficiary account could not be transferred into a IRA BDA account before year end. let’s assume the plan document allows for such. and i suppose if allowable, the ten years would be from date of date-december.thank you again
Permalink Submitted by Alan - IRA critic on Mon, 2021-11-15 21:11
That will not be possible, because the decedent was the designated beneficiary and the son is a successor beneficiary. Successor beneficiaries are not eligible for direct rollovers to inherited IRAs. The son will have to continue the RMD schedule of mother, reducing the divisor she would have used by 1.0 each year.