Settlement Options
My mother died in 2021. She previously inherited four accounts from her husband when he died in 2008. The accounts include a Traditional IRA, Roth IRA, 401(a), and “Savings and Investment Plan Nonqualified”. I am now the non-spouse beneficiary of these accounts and I have two questions:
(a) I understand the Secure Act’s 10-year rule applies to the Traditional IRA and the Roth IRA. But what about the 401(a) and the “Savings and Investment Plan Nonqualified”? Can I take Stretch RMDs from these two accounts or are these also subject to the Secure Act’s 10-year withdrawal rule?
(b) The settlement options I was offered by the custodian (TIAA) are to either (1) stay in the plan as a beneficiary or (2) roll over to my own inherited account. What is the difference? Does my selection affect whether any of these accounts would be subject to the Secure Act rules?
Thank you for clarifying this confusing issue!
Permalink Submitted by Alan - IRA critic on Fri, 2021-11-12 19:07
Sorry to hear of your loss. You will be subject to the Secure Act for the IRAs and maybe the 401a, and therefore the 10 year rule. You are also responsible for completing mother’s 2021 (but not for years prior to 2021) RMD if she did not complete them. These RMDs should be completed before year end to avoid having to file a request to waive the penalty on Form 5329.
If the 401a is considered a govt plan or collectively bargained (union) plan, the Secure Act does not apply for deaths in 2021. If that’s the case, you would have to continue mother’s RMD schedule.
The savings plan is likely not subject to RMDs unless the custodian so indicates. Is that TIIA?
Whether you remain in the plans as a beneficiary or do a direct rollover of the 401a to an inherited IRA does not affect your 10 year rule requirement if that applies.
Note that if your mother failed to take her full inherited IRA or Roth IRA RMD in any year from 2010 to 2019, she defaulted to ownership of those accounts. That would have been benefited you prior to the Secure Act, but now you are subject to the 10 year rule regardless of whether she defaulted to owning those IRAs or continued the entire time as a beneficiary. You get the 10 year rule unless you are disabled and she defaulted to owning those IRAs. Therefore, there is no longer any benefit to researching whether she may have defaulted to ownership unless you are disabled or chronically ill.